The dynamics of credit rating report content

We show that credit rating reports contain valuable information beyond the letter rating itself. Using 3,352 Moody's rating action reports, we analyze clarity, length, numerical detail, uncertainty, and uniqueness and find that the stock market reacts to rating content and that this content predicts future rating actions. Analyst fixed effects account for about 20% of the variation in report style, indicating that individual analysts matter but do not dominate. Following the Dodd-Frank Act, reports became longer and clearer, especially when ratings diverged from expectations, consistent with heightened litigation risk. Our findings indicate that the words behind the letter are associated with stock market reactions and change systematically with regulation.