Does rating analyst subjectivity affect corporate debt pricing?

Cesare Fracassi, Stefan Petry, Geoffrey Tate

Research output: Contribution to journalArticlepeer-review


We find evidence of systematic optimism and pessimism among credit analysts, comparing contemporaneous ratings of the same firm across rating agencies. These differences in perspectives carry through to debt prices and negatively predict future changes in credit spreads, consistent with mispricing. Moreover, the pricing effects are the largest among firms that are the most opaque, likely exacerbating financing constraints. We find that masters of business administration (MBAs) provide higher quality ratings. However, optimism increases and accuracy decreases with tenure covering the firm. Our analysis demonstrates the role analysts play in shaping investor expectations and its effect on corporate debt markets.
Original languageEnglish
Pages (from-to)514
Number of pages538
JournalJournal of Financial Economics
Early online date16 Feb 2016
Publication statusPublished - Jun 2016


  • Analysts
  • Credit ratings
  • Credit spreads
  • Investor sentiment


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