How do Rating Agencies Score in Predicting Firm Performance

We use dynamic panel analysis to examine whether credit rating agencies achieve what they claim to achieve, namely, look into the future when assigning their ratings. We find that Moody's ratings help predict individual financial ratios over a horizon of up to five years. Ratings also predict a multivariate credit score, again over five years. The contribution of ratings appears to be economically significant and robust for different specifications.

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Year of publication:	2007-08
Authors:	Löffler, Gunter ; Posch, Peter N.
Institutions:	Sonderforschungsbereich 649: Ökonomisches Risiko, Wirtschaftswissenschaftliche Fakultät
Subject:	Credit Ratings \| Predictive ability \| Dynamic Panel Model

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Extent:	application/pdf
Series:	SFB 649 Discussion Papers.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number SFB649DP2007-043 29 pages
Classification:	C33 - Models with Panel Data ; G20 - Financial Institutions and Services. General ; G33 - Bankruptcy; Liquidation
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005677884