Analyst distance and credit rating consistency
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Date
2024-03-07
Authors
Altdörfer, Marc
Guettler, Andre
Löffler, Gunter
Journal Title
Journal ISSN
Volume Title
Publication Type
Wissenschaftlicher Artikel
Published in
Journal of International Money and Finance, 2024
Abstract
In this paper, we investigate the effect of analyst distance on the assignment of credit ratings and show that issuers with analysts located in more distant offices obtain more conservative ratings than issuers with analysts located closer. Our results are robust to an analyst home bias and suggest that more distant analysts are subject to an informational disadvantage when conducting their rating analysis. Given an asymmetric reputational cost function that penalizes an overestimation of credit quality more heavily than an underestimation, assigning more conservative ratings is a rational response to the higher levels of information uncertainty that a greater distance can entail.
Description
Faculties
Fakultät für Mathematik und Wirtschaftswissenschaften
Institutions
Institut für Strategische Unternehmensführung und Finanzierung
Institut für Finanzwirtschaft
Institut für Finanzwirtschaft
Citation
DFG Project uulm
EU Project THU
Other projects THU
License
CC BY 4.0 International
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DOI external
DOI external
10.1016/j.jimonfin.2024.103055
Institutions
Periodical
Degree Program
DFG Project THU
item.page.thu.projectEU
item.page.thu.projectOther
Series
Keywords
Credit ratings, Analyst distance, Home bias, Default risk, Analysts