Abstract
Globalization has increased the demand for information about creditworthiness of firms. Such information has been provided by rating agencies for decades already in the United States. Since ratings are one-dimensional, they have the advantage of compact information. On the other hand they are derived mainly from subjective considerations which raises the question of the informational content of ratings. To answer this question, we analyze an econometric model which has already been considered by Liu and Thakor (1984) and Kao and Wu (1990/1994). We show that the use of ratings as explanatory variables leads to special methodological problems of “ordinal regressors”. In particular we employ a new estimation method first proposed by Gourieroux, Monfort and Renault (1993) which is more suitable than the method of conditional expectations first suggested by Terza (1987). Empirical results are given for a data set already used in the literature.
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Kukuk, M., Ronning, G., von Tessin, P. (2001). The Informational Content of Ratings: Ordinal Regressors in Econometrics. In: Berninghaus, S.K., Braulke, M. (eds) Beiträge zur Mikro- und zur Makroökonomik. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-56606-6_23
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DOI: https://doi.org/10.1007/978-3-642-56606-6_23
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