An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Stephen Haggard
University Of Missouri - Columbia

Ravi Jain
University of Massachusetts - Lowell

Xiumin Martin
University of Missouri - Columbia

Raynolde Pereira
University of Missouri - Columbia

Abstract: A split bond rating arises when the two major rating agencies, Moody’s and Standard & Poor, provide different ratings for the same bond issue. Recent research contends that this split rating reflects disagreement between credit rating agencies due to the uncertainty created by the opacity of the issuing firm’s assets. This paper explores a complementary explanation by examining whether firm information quality, the precision of signals from the firm’s financial information system, is associated with credit rating analyst disagreement. Using ratings for a sample of new debt issues, we find a positive association between our measure of information quality and credit rating analyst disagreement. Our findings are robust to consideration of issuing firm asset opacity.

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