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
Authors:	Löffler, Gunter ; Posch, Peter N.
Publisher:	Berlin : Humboldt University of Berlin, Collaborative Research Center 649 - Economic Risk
Subject:	Ratingagentur \| Kreditwürdigkeit \| Prognose \| Statistischer Fehler \| Zeit \| Panel \| USA \| Credit Ratings \| Predictive ability \| Dynamic Panel Model

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Series:	SFB 649 Discussion Paper ; 2007-043
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	55856089X [GVK] hdl:10419/25215 [Handle] RePEc:zbw:sfb649:sfb649dp2007-043 [RePEc]
Classification:	C33 - Models with Panel Data ; G20 - Financial Institutions and Services. General ; G33 - Bankruptcy; Liquidation
Source:	EconStor

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