DO MOODY'S AND S&P FIRM'S RATINGS DIFFER?

Kód výsledku v 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>

Výsledek na webu

<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>

Jazyk výsledku

angličtina

Název v původním jazyce

DO MOODY'S AND S&P FIRM'S RATINGS DIFFER?

Popis výsledku v původním jazyce

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&apos; 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&apos;s and Moody&apos;s: although their rating methods are not coincident, but their aim is to measure a similar latent variable - the firm&apos;s credit risk. These divergences could be caused, at least in part, by possible conflicts of interest or by a phenomenon called &apos;rating inflation&apos;. A difference index is proposed to measure the differences in ratings when comparing several agencies&apos; 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.

Název v anglickém jazyce

DO MOODY'S AND S&P FIRM'S RATINGS DIFFER?

Popis výsledku anglicky

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&apos; 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&apos;s and Moody&apos;s: although their rating methods are not coincident, but their aim is to measure a similar latent variable - the firm&apos;s credit risk. These divergences could be caused, at least in part, by possible conflicts of interest or by a phenomenon called &apos;rating inflation&apos;. A difference index is proposed to measure the differences in ratings when comparing several agencies&apos; 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.

Druh

J_imp - Článek v periodiku v databázi Web of Science

CEP obor

—

OECD FORD obor

50206 - Finance

Projekt

<a href="/cs/project/EE2.3.20.0296" target="_blank" >EE2.3.20.0296: Výzkumný tým pro modelování ekonomických a finančních procesů na VŠB-TU Ostrava</a><br>

Návaznosti

P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Rok uplatnění

2020

Kód důvěrnosti údajů

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Název periodika

Economics and Sociology

ISSN

2071-789X

e-ISSN

2306-3459

Svazek periodika

13

Číslo periodika v rámci svazku

4

Stát vydavatele periodika

PL - Polská republika

Počet stran výsledku

14

Strana od-do

173-186

Kód UT WoS článku

000658937000001

EID výsledku v databázi Scopus

2-s2.0-85101044574