DO MOODY'S AND S&P FIRM'S RATINGS DIFFER?
The result's identifiers
Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F61989100%3A27510%2F20%3A10245895" target="_blank" >RIV/61989100:27510/20:10245895 - isvavai.cz</a>
Result on the web
<a href="https://www.economics-sociology.eu/?786,en_do-moodys-and-sp-firms-ratings-differ-" target="_blank" >https://www.economics-sociology.eu/?786,en_do-moodys-and-sp-firms-ratings-differ-</a>
DOI - Digital Object Identifier
<a href="http://dx.doi.org/10.14254/2071-789X.2020/13-4/11" target="_blank" >10.14254/2071-789X.2020/13-4/11</a>
Alternative languages
Result language
angličtina
Original language name
DO MOODY'S AND S&P FIRM'S RATINGS DIFFER?
Original language description
Credit rating agencies produce public statements about the financial health of companies, institutions, geographical entities and financial assets. The main available information about firms, useful for analyzing their long-term creditworthiness is their public accounts about the activities and results, besides the audit reports and their credit ratings. The agencies' results are mainly based on these data, but they claim to use additional qualitative information, with a methodology only partially disclosed. When different agencies produce long-term ratings about a particular firm, it should be expected that they were coincident, or at least similar, so that investors could use any of them to assess the potential financial risk. This is not the case, as the same companies can be rated differently by different agencies. This is the case with Standard and Poor's and Moody's: although their rating methods are not coincident, but their aim is to measure a similar latent variable - the firm's credit risk. These divergences could be caused, at least in part, by possible conflicts of interest or by a phenomenon called 'rating inflation'. A difference index is proposed to measure the differences in ratings when comparing several agencies' evaluations. The situation with the two main agencies is examined, using two large samples in a five-year period: clear discrepancies are observed, in some economic sectors, and similarities in others, with some evidence about getting higher ratings depending on a chosen agency. Also, a convergence of ratings during the period of 2014-2018 is observed, more prominent in some sectors, suggesting that additional regulation is needed to increase the market transparency.
Czech name
—
Czech description
—
Classification
Type
J<sub>imp</sub> - Article in a specialist periodical, which is included in the Web of Science database
CEP classification
—
OECD FORD branch
50206 - Finance
Result continuities
Project
<a href="/en/project/EE2.3.20.0296" target="_blank" >EE2.3.20.0296: Research team for modelling of economic and financial processes at VSB-TU Ostrava</a><br>
Continuities
P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)
Others
Publication year
2020
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů
Data specific for result type
Name of the periodical
Economics and Sociology
ISSN
2071-789X
e-ISSN
2306-3459
Volume of the periodical
13
Issue of the periodical within the volume
4
Country of publishing house
PL - POLAND
Number of pages
14
Pages from-to
173-186
UT code for WoS article
000658937000001
EID of the result in the Scopus database
2-s2.0-85101044574