Are credit ratings procyclical?

Jeffery D. Amato*, Craig H. Furfine

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

144 Scopus citations


This paper studies the influence of the state of the business cycle on credit ratings. In particular, we assess whether rating agencies are excessively procyclical in their assignment of ratings. Our analysis is based on a model of ratings determination that takes into account factors that measure the business and financial risks of firms, in addition to indicators of macroeconomic conditions. Utilizing annual data on all US firms rated by Standard & Poor's, we find that ratings do not generally exhibit excess sensitivity to the business cycle. In addition, we document that previously reported findings of a secular tightening of ratings standards are not robust to a more complete accounting of systematic changes to measures of risk.

Original languageEnglish (US)
Pages (from-to)2641-2677
Number of pages37
JournalJournal of Banking and Finance
Issue number11
StatePublished - Nov 2004


  • Business cycles
  • Credit risk
  • Rating agencies

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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