Are investors fixated on credit ratings? Reinterpreting the municipal bond recalibration

Cornaggia et al. (2017) construe positive investor reactions to Moody's 2010 recalibration as evidence that credit ratings matter. However, the purpose of recalibration was officially discussed by Moody's as early as 2002. Furthermore, for most bonds, the implementation of recalibration presented limited information and followed an algorithm which was published prior to the implementation date. We interpret investor reactions on the implementation of recalibration as more consistent with evidence of investor fixation towards credit ratings.