Rating Agency Adjustments to GAAP Financial Statements and Their Effect on Ratings and Credit Spreads

171 citations recorded by the source corpus.

Citations in the corpus

Financial statement comparability and credit risk (2013, unknown): “Moody’s is representative of credit rating agencies generally, who compute financial ratios using adjusted accounting numbers and base their ratings on the adjusted, more comparable, ratios (Kraft (2010)).”
Do Rating Agencies Cater? Evidence from Rating-Based Contracts (2015, unknown): “More generally, the rating agency makes extensive adjustments to GAAP financials as shown in Kraft (2010): the major hard adjustment includes off-balance-sheet debt, leading to substantially higher leverage ratios.”
Accounting Information in Financial Contracting: The Incomplete Contract Theory Perspective (2016, unknown): “This is puzzling, as there are many more variables in financial statements that can provide incremental information; rating agencies utilize an extensive number of accounting ratios to evaluate a firm’s creditworthiness (Kraft, 2015).”
The impact of narrative disclosure readability on bond ratings and the cost of debt (2017, unknown): “Furthermore, although it is well documented that rating agencies make hard and soft adjustments during the rating process (Kraft 2015), it remains unclear the extent to which they rely on the text of the financial statements and what soft information they consider when making their adjustments.”