When Do Differences in Credit Rating Methodologies Matter? Evidence from High Information Uncertainty Borrowers

• 成果类型: Article
• 署名作者: Bonsall, Samuel B.; Koharki, Kevin; Neamtiu, Monica
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park; Washington University (WUSTL); City University of New York (CUNY) System; Baruch College (CUNY)
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-51641
• 发表日期: 2017
• 页码: 53-79
• 关键词: Geography; QUALITY; IMPACT; distance; moodys

摘要

This study investigates whether and when differences in the credit rating agencies' methodologies result in differences in rating properties. In particular, this study focuses on differences in information processing constraints between a rating agency that utilizes qualitative analysis and direct access to borrowers' management in its rating process (Standard & Poor's) compared to one that does not (Egan Jones Ratings Company) and how these differences affect rating quality. We find that as information uncertainty about borrowers increases, Egan Jones's rating accuracy, informativeness, and timeliness decrease relative to Standard & Poor's. Our findings suggest that Egan Jones's more restricted rating methodology can lead to limitations in information processing and, thus, reductions in Egan Jones's rating quality advantage for borrowers with greater information uncertainty.