Graduation Year

Fall 2013

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts



Reader 1

Mitch Warachka

Reader 2

Ricardo Fernholz

Rights Information

© 2013 Charles H. Blyniuk


This paper seeks to investigate the reaction of credit ratings and credit markets in response to accounting restatements. Accounting restatements can often be perceived as a precursor to fraudulent activity, which could lead to a more negative credit rating, or a heightened credit default swap (CDS) price. CDS prove to be a useful measuring tool as they adjust to changes relatively quickly; much more quickly than the assessment of a credit rating agency. My results suggest that restatements do indeed have an effect on credit rating. It does, however take longer for credit ratings to be updated after the restatement, but CDS quotes move faster and are just as, if not more accurate. I also find that credit default swaps do not anticipate restatements, showing that while the credit markets are beating the rating agencies, they do not appear to be beating the accountants.

This thesis is restricted to the Claremont Colleges current faculty, students, and staff.