Do Security Analysts Discipline Credit Rating Agencies?

Kingsley Fong, Harrison Hong, Marcin Kacperczyk, Jeffrey D. Kubik

Research output: Contribution to journalArticlepeer-review

3 Scopus citations


Credit ratings of corporations are biased, but the forces driving this bias are unclear. We argue it would be difficult for rating agencies to issue high grades for a firm's debt when there are a lot of objective equity analyst reports about the firm's earnings that are informative about its default. We find that an exogenous drop in analyst coverage leads to greater optimism-bias in ratings, especially for firms with little bond analyst coverage and those that are close to default. This coverage-induced shock leads to less informative ratings about future defaults and downgrades and more subsequent bond security mispricings.

Original languageEnglish (US)
Pages (from-to)815-848
Number of pages34
JournalReview of Corporate Finance Studies
Issue number4
StatePublished - Nov 1 2022

ASJC Scopus subject areas

  • Business and International Management
  • Finance
  • Economics and Econometrics


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