PT - JOURNAL ARTICLE AU - Dror Parnes TI - Observed Leniency among the Credit Rating Agencies AID - 10.3905/jfi.2018.28.1.048 DP - 2018 Jun 30 TA - The Journal of Fixed Income PG - 48--60 VI - 28 IP - 1 4099 - https://pm-research.com/content/28/1/48.short 4100 - https://pm-research.com/content/28/1/48.full AB - Credit agencies periodically change their ratings for corporate bonds. These rating modifications advance under different circumstances and occur at distinct rates. In this study, the author examines the volumes, frequencies, and likelihoods of credit rating changes as issued by Standard & Poor’s, Moody’s, and Fitch Ratings. He examines these subsequent rating modifications (both the first and the second recorded changes post the initial ratings) with a perspective of upgrades versus downgrades. Overall, he identifies a much greater tendency for rating downgrades than upgrades following new issuance of corporate debt, which suggests that the initial credit ratings are too lenient. This study, therefore, has potential inferences for fixed-income market participants, who should consider discounting reported credit ratings, at least to some degree.TOPICS: Legal and regulatory issues for structured finance, statistical methods