What’s in a Rating Report? Parsing the Content of Moody’s Credit Rating Reports from 1998-2016

We examine the readability, length, numerical content, uncertainty, and uniqueness of Moody’s rating reports and analyze how regulatory events have influenced these measures between 1998-2016. We find that information in rating reports significantly dropped after the Credit Rating Reform Act in 2006, but readability and the length of rating reports significantly improved after the Dodd-Frank regulation in 2010. We also find that greater readability leads to lower announcement returns after downgrades. Reports that are more similar to previous reports are associated with less negative announcement returns, providing evidence that the content of rating reports plays a significant role for investors.