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

Citation

DFG Project uulm

EU Project THU

Other projects THU

License

CC BY 4.0 International

Is version of

Has version

Supplement to

Has erratum

Erratum to

Has Part

Part of

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