Nikunj Kapadia is a Professor of Finance at the Isenberg School of Management, University of Massachusetts, Amherst. He holds a Ph.D. in Finance from the Stern School of Business, New York University, and a MBA from the Indian Institute of Management, Bangalore. His research interests are in equity derivatives and credit risk. He has published articles in the Journal of Financial Economics, Journal of Finance, Review of Financial Studies, and others. He is on the editorial board of the Journal of Derivatives, and has previously served on the editorial board of the Financial Analyst Journal. He is the recipient of the Isenberg School's Teaching Award, twice-recipient of the Isenberg School's Researcher of the Year Award, and the recipient of the Western Finance Association's Caesarea Best Paper in Risk Management award.
Prior to joining the University of Massachusetts, he was with Bear Stearns, New York. He has served as a visiting researcher at the Office of Financial Research, and as visiting faculty at New York University, University of Maryland, China-Europe International Business School, and the Indian School of Business. He has served on the corporate board of Aurionpro Solutions.
This paper considers whether the rating agency attempts to mitigate the feedback effect through its rating actions. Using Moody’s issuer ratings over 1982–2009, the paper shows that firms with greater external financing constraints are less likely to be…