Changing credit rating standards in the UK: empirical evidence from 1999 to 2004

In recent years, the number of downgrades in UK corporate credit ratings has exceeded the number of upgrades, leading some to conclude that the credit quality of UK companies has deteriorated. However, another explanation is that the credit rating agencies have become more stringent in the credit rating process. Summary statistics, a transition matrix and an ordered probit analysis of 69 UK credit rated firms for the years 1999-2004 suggests that the evidence supports both the explanations. In addition, the analysis shows that there is a clear pattern of UK credit ratings converging towards the investment-grade threshold category (BBB).