RT Journal Article
SR Electronic
T1 Rating Agency Actions Around the Investment-Grade Boundary
JF The Journal of Fixed Income
FD Institutional Investor Journals
SP 25
OP 37
DO 10.3905/jfi.2004.391025
VO 13
IS 4
A1 Richard Johnson
YR 2004
UL https://pm-research.com/content/13/4/25.abstract
AB Recent defaults of large U.S. firms have prompted debate over whether credit rating agencies were slow to spot these firms’ problems. This examination of ratings data from nationally recognized statistical rating organizations (NRSROs) and from a non-recognized agency contributes more information. There is some tendency for NRSRO one-day downgrades starting from the lowest investment-grade, BBB–, to travel more grades than downgrades from neighboring grades. This could suggest either that default risk at the NRSRO grade BBB– is high, or that downgrades to junk status damage firms. A comparison of data from a non-NRSRO agency and an NRSRO shows that the NRSRO regrades from BBB– moved toward the non-NRSRO's earlier ratings. This suggests the non-NRSRO defines its grade BBB– more narrowly than the NRSRO.