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Heimpold (Interview)
What South Korea has to do with the IWH ... Gerhard Heimpold about his experiences at IWH Mr Heimpold, if you were to describe your job to your neighbour, what would you tell her?…
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Loose (Interview)
When there were almost no flats in Halle yet ... Brigitte Loose about IWH's foundation and development Ms Loose, how did you experience the early days of IWH? Looking back, it was…
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Membership Five Good Reasons for Becoming a Member of the Halle Institute for Economic Research (IWH) The Halle Institute for Economic Research (IWH) - Member of the Leibniz…
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Our Projects 07.2022 ‐ 12.2026 Evaluation of the InvKG and the federal STARK programme On behalf of the Federal Ministry of Economics and Climate Protection, the IWH and the RWI…
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Vocational Training at IWH At the Halle Institute for Economic Research (IWH) the state-approved professions specialist in media and information services (m/f/x) [library] ,…
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Population and labour market Inhabitants are all people (Germans and foreigners) with permanent residence in federal territory (or in a Land). That does not include members of…
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Assistance with attacks in research communication
Scicomm Support Services Scicomm supports and advises researchers and research communicators in the event of attacks and unobjective conflicts in research communication. Services:…
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Market-implied Ratings and Their Divergence from Credit Ratings
Iftekhar Hasan, Winnie P. H. Poon, Jianfu Shen, Gaiyan Zhang
Journal of Financial Research,
No. 2,
2023
Abstract
In this article, we investigate the divergence between credit ratings (CRs) and Moody's market-implied ratings (MIRs). Our evidence shows that rating gaps provide incremental information to the market regarding issuers' default risk over CRs alone in the short horizon and outperform CRs over extended horizons. The predictive ability of rating gaps is greater for more opaque and volatile issuers. Such predictability was more pronounced during the 2008 financial crisis but weakened in the post-Dodd-Frank Act period. This finding is consistent with credit rating agencies' efforts to improve their performance when facing regulatory pressure. Moreover, our analysis identifies rating-gap signals that do (do not) lead to subsequent Moody's actions to place issuers on negative outlook and watchlists. We find that negative signals from MIR gaps have a real economic impact on issuers' fundamentals such as profitability, leverage, investment, and default risk, thus supporting the recovery-efforts hypothesis.
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