The Declining Credit Quality of U.S. Corporate Debt: Myth or Reality?
Article first published online: 17 DEC 2002
The American Finance Association 1998
The Journal of Finance
Volume 53, Issue 4, pages 1389–1413, August 1998
How to Cite
Blume, M. E., Lim, F. and Mackinlay, A. C. (1998), The Declining Credit Quality of U.S. Corporate Debt: Myth or Reality?. The Journal of Finance, 53: 1389–1413. doi: 10.1111/0022-1082.00057
- Issue published online: 17 DEC 2002
- Article first published online: 17 DEC 2002
- Cited By
In recent years, the number of downgrades in corporate bond ratings has exceeded the number of upgrades, leading some to conclude that the credit quality of U.S. corporate debt has declined. However, an alternative explanation of this apparent decline in credit quality is that the rating agencies are now using more stringent standards in assigning ratings. An ordered probit analysis of a panel of firms from 1978 through 1995 suggests that rating standards have indeed become more stringent, implying that at least part of the downward trend in ratings is the result of changing standards.