International Finance Discussion Papers (IFDP)
June 2000
How Consistent Are Credit Ratings? A Geographic and Sectoral Analysis of Default Risk
John Ammer and Frank Packer
Abstract:
We examine differences in default rates by sector and obligor domicile. We find evidence that credit ratings have been imperfectly calibrated across issuer sectors in the past. Controlling for year of issue and rating, default rates appear to be higher for U.S. financial firms than for U.S. industrial firms. Sectoral differences in recovery rates do not offset the higher default rates. By contrast, we do not find significant differences in default rates between U.S. and foreign firms.
Keywords: Bonds, rating agencies, capital requirements, Basel Committee on Banking Supervision
PDF: Full Paper
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