Are Credit Ratings More Rigorous for Widely Covered Firms?

• 成果类型: Article
• 署名作者: Bonsall, Samuel B.; Green, Jeremiah R.; Muller, Karl A., III
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-52044
• 发表日期: 2018
• 页码: 61-94
• 关键词: MEDIA COVERAGE; news stories; INFORMATION; QUALITY; IMPACT; press; moodys; online; POWER; debt

摘要

We study how business press coverage can discipline credit rating agency actions. Because of their greater prominence and visibility to market participants, more widely covered firms can pose greater reputational costs for rating agencies. Consistent with rating agencies limiting such risk, we find that ratings for more widely covered firms are more timely and accurate, downgraded earlier and systematically lower in the year prior to default, and better predictors of default and non-default. We also find that the recent tightening of credit rating standards is largely explained by growing business press coverage of public debt issuers. Additionally, we find that credit rating agencies take explicit actions to improve their ratings by assigning better educated and more experienced analysts to widely covered firms. Moreover, we document that missed defaults of more visible firms create greater negative economic consequences for rating agencies, and that rating improvements following the financial crisis were greater for more visible firms.