Does rating analyst subjectivity affect corporate debt pricing?Citation formats

Standard

Does rating analyst subjectivity affect corporate debt pricing? / Fracassi, Cesare; Petry, Stefan; Tate, Geoffrey.

In: Journal of Financial Economics, Vol. 120, 06.2016, p. 514.

Research output: Contribution to journalArticle

Harvard

Fracassi, C, Petry, S & Tate, G 2016, 'Does rating analyst subjectivity affect corporate debt pricing?' Journal of Financial Economics, vol. 120, pp. 514. https://doi.org/10.1016/j.jfineco.2016.02.006

APA

Vancouver

Author

Fracassi, Cesare ; Petry, Stefan ; Tate, Geoffrey. / Does rating analyst subjectivity affect corporate debt pricing?. In: Journal of Financial Economics. 2016 ; Vol. 120. pp. 514.

Bibtex

@article{2dcbdd69a7494b398f84de15b07cadd4,
title = "Does rating analyst subjectivity affect corporate debt pricing?",
abstract = "We find evidence of systematic optimism and pessimism among credit analysts, comparing contemporaneous ratings of the same firm across rating agencies. These differences in perspectives carry through to debt prices and negatively predict future changes in credit spreads, consistent with mispricing. Moreover, the pricing effects are the largest among firms that are the most opaque, likely exacerbating financing constraints. We find that masters of business administration (MBAs) provide higher quality ratings. However, optimism increases and accuracy decreases with tenure covering the firm. Our analysis demonstrates the role analysts play in shaping investor expectations and its effect on corporate debt markets.",
keywords = "Analysts, Credit ratings, Credit spreads, Investor sentiment",
author = "Cesare Fracassi and Stefan Petry and Geoffrey Tate",
year = "2016",
month = "6",
doi = "10.1016/j.jfineco.2016.02.006",
language = "English",
volume = "120",
pages = "514",
journal = "Journal of Financial Economics",
issn = "0304-405X",
publisher = "Elsevier BV",

}

RIS

TY - JOUR

T1 - Does rating analyst subjectivity affect corporate debt pricing?

AU - Fracassi, Cesare

AU - Petry, Stefan

AU - Tate, Geoffrey

PY - 2016/6

Y1 - 2016/6

N2 - We find evidence of systematic optimism and pessimism among credit analysts, comparing contemporaneous ratings of the same firm across rating agencies. These differences in perspectives carry through to debt prices and negatively predict future changes in credit spreads, consistent with mispricing. Moreover, the pricing effects are the largest among firms that are the most opaque, likely exacerbating financing constraints. We find that masters of business administration (MBAs) provide higher quality ratings. However, optimism increases and accuracy decreases with tenure covering the firm. Our analysis demonstrates the role analysts play in shaping investor expectations and its effect on corporate debt markets.

AB - We find evidence of systematic optimism and pessimism among credit analysts, comparing contemporaneous ratings of the same firm across rating agencies. These differences in perspectives carry through to debt prices and negatively predict future changes in credit spreads, consistent with mispricing. Moreover, the pricing effects are the largest among firms that are the most opaque, likely exacerbating financing constraints. We find that masters of business administration (MBAs) provide higher quality ratings. However, optimism increases and accuracy decreases with tenure covering the firm. Our analysis demonstrates the role analysts play in shaping investor expectations and its effect on corporate debt markets.

KW - Analysts

KW - Credit ratings

KW - Credit spreads

KW - Investor sentiment

U2 - 10.1016/j.jfineco.2016.02.006

DO - 10.1016/j.jfineco.2016.02.006

M3 - Article

VL - 120

SP - 514

JO - Journal of Financial Economics

JF - Journal of Financial Economics

SN - 0304-405X

ER -