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This paper investigates the information in corporate credit ratings from a positive and normative perspective. If ratings are to be informative indicators of credit risk they must re ‡ect what a risk-averse investor cares about: both raw default probability and systematic risk. We ...nd that ratings are inaccurate measures of raw default probability -they are dominated as predictors of failure by a simple model based on publicly available ...nancial information. However, ratings do containdoi:10.1287/mnsc.2016.2514 fatcat:vc6nwpvvtvaobly4evlbu763f4