Abstract
The disagreements among credit rating agencies (split ratings) change over time, reflecting time varying nature in information opacity of firms. We analyse how the changes in information opacity affect the confidence in the reliability of ratings. We document that negative credit rating adjustments have a stronger impact on bond excess returns: (i) when the information opacity cuts down and (ii) with lower levels of information opacity. Investors seems to have more trust on the information disclosed by rating adjustment in those cases. The excess return response also depends on the credit rating level, being the dynamics of opacity relevant only for high yield (HY) bonds. The key results persist when alternative measures of rating agencies' disagreement are taken into consideration.
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