Public Discourse
10 Sep 2022
Informational Efficiency Of Credit Ratings

The timeliness of the credit rating of a firm has been frequently called into question over the previous two decades. This paper examines whether changes in credit ratings can be updated more frequently than at the frequency of updates in the accounting data. The paper finds that, when market equity prices of firms are readily available, changes in high frequency measures such as the Distance to Default, along with low frequency firm characteristics such as ownership structure and accounting data, can provide a more timely update on the probability of credit ratings downgrades.


Informational efficiency of credit ratings, Nidhi Aggarwal, Manish K. Singh and Susan Thomas, XKDR Working paper 14, September 2022

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