Time to change. Rating changes and policy implications

► I examine the timeliness of rating changes and identify factors influencing the stickiness of rating actions, i.e. situations where ratings remain unaffected by a large change of market-based default probability measures. ► Introducing an econometric extension to friction models I estimate thresholds of those measures which trigger rating migration. ► On average a change of more than two notches leads to a rating adjustment. ► Changes are more timely during recessions and for lower credit quality firms. ► These findings help in addressing lessons learned from the recent financial crisis in which rating agencies played a crucial role.