Rating Migrations: The Effect of History and Time

Rating Migrations: The Effect of History and Time

We examine the effect of rating history and the passage of time on the rating migration hazard for corporate debt issuers. Controlling for industry effects and the evolution of business and political cycles, the results consistently show that the next change of rating depends more strongly on rating...

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Bibliographic Details
Published in:Abacus (Sydney) Vol. 50; no. 2; pp. 174 - 202
Main Authors: Dang, Huong, Partington, Graham
Format: Journal Article
Language:English
Published: Sydney Blackwell Publishing Ltd 01-06-2014
Subjects:
Bond issues
Business cycles
Corporate debt
Credit rating
Credit ratings
Financial management
Historical analysis
Migration
Migration hazard
Rating changes
Rating history
Rating migration
Speculation
Studies
Survival analysis
Time
Time interaction
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Summary:We examine the effect of rating history and the passage of time on the rating migration hazard for corporate debt issuers. Controlling for industry effects and the evolution of business and political cycles, the results consistently show that the next change of rating depends more strongly on rating history than it does on the current rating. However, there are significant interactions between the main effects of rating history and the duration of the current rating. The result is substantial decay in the effects of rating history the longer a rating remains unchanged. This decay effect is stronger for downgrades and for ratings in the speculative category.
Bibliography:istex:10128C77A5704D8CFB24140EE376436103773AD3
ark:/67375/WNG-50VMD5KC-2
ArticleID:ABAC12027
ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0001-3072
1467-6281
DOI:10.1111/abac.12027