Credit rating agencies' outlooks signal future financial market changes effectively.
Credit rating agencies like Moody's and Standard & Poor's provide important information to financial markets. They use rating changes, outlooks, and Watchlists to signal potential changes in a company's credit quality. Despite criticisms of slow reactions, these agencies actually provide most information through Watchlist and outlook signals. This study found that these signals are crucial for understanding future rating changes and are a key source of information for financial markets.