Are Credit Ratings Valuable Information?


Czarnitzki, Dirk ; Kraft, Kornelius


[img]
Preview
PDF
ZEW14.pdf - Published

Download (130kB)

URL: http://ub-madoc.bib.uni-mannheim.de/125
URN: urn:nbn:de:bsz:180-madoc-1253
Document Type: Working paper
Year of publication: 2004
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: C25 G33 ,
Subject headings (SWD): Deutschland , Betrieb , Kreditgewährung , Kreditwürdigkeit
Abstract: Credit ratings are commonly used by lenders to assess the default risk, because every credit is connected with a possible loss. If the probability of a default is above a certain threshold, a credit will not be provided. The purpose of this paper is to test whether credit ratings contribute valuable information on the creditworthiness of firms. Employing a large sample of Western German manufacturing firms, we investigate loan defaults. First, we estimate Probit models with publicly available information. Subsequently, we additionally use a credit rating and show that it contributes significantly to the regression fit. However, the publicly available information has an independent effect aside of the ratings. Simple calculations demonstrate that the interest rate has to increase significantly to compensate for a possible loss in case of default, if a firm has a weak rating.
Additional information:

Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




+ Citation Example and Export

Czarnitzki, Dirk ; Kraft, Kornelius (2004) Are Credit Ratings Valuable Information? Open Access [Working paper]
[img]
Preview


+ Search Authors in

+ Download Statistics

Downloads per month over past year

View more statistics



You have found an error? Please let us know about your desired correction here: E-Mail


Actions (login required)

Show item Show item