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On April 26, 1982, Moody’s Investors Service refined its rating system for the first time in its seventy‐three year rating history. We examine the information content of the rating refinement in the study. We find a statistically significant change in the yields on bonds whose ratings were downgraded. The detection of the impact of refinement on bond prices implies that rating agencies perform an important function in financial markets, that is they provide information to investors.
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Liu et al. (1999) studied this question.
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