TY - JOUR T1 - Observed Leniency among the Credit Rating Agencies JF - The Journal of Fixed Income SP - 48 LP - 60 DO - 10.3905/jfi.2018.28.1.048 VL - 28 IS - 1 AU - Dror Parnes Y1 - 2018/06/30 UR - https://pm-research.com/content/28/1/48.abstract N2 - Credit agencies periodically change their ratings for corporate bonds. These rating modifications advance under different circumstances and occur at distinct rates. In this study, the author examines the volumes, frequencies, and likelihoods of credit rating changes as issued by Standard & Poor’s, Moody’s, and Fitch Ratings. He examines these subsequent rating modifications (both the first and the second recorded changes post the initial ratings) with a perspective of upgrades versus downgrades. Overall, he identifies a much greater tendency for rating downgrades than upgrades following new issuance of corporate debt, which suggests that the initial credit ratings are too lenient. This study, therefore, has potential inferences for fixed-income market participants, who should consider discounting reported credit ratings, at least to some degree.TOPICS: Legal and regulatory issues for structured finance, statistical methods ER -