Moody’s Corporation – Understanding Moody’s Financial Services

What is Moody’s?

Moody’s corporation, otherwise known as Moody’s, is an American business and financial services company. It is the holding company that owns both Moody’s Investors Service, which rates fixed-income debt securities, as well as Moody’s Analytics, which offers software and research services.

It was founded in 1909 by John Moody to produce manuals of statistics related to stocks and bonds and bond ratings. In 1962, Moody’s was acquired by Dun & Bradstreet. In 2000, Moody’s Corporation was spun off by Dun &Bradstreet as a separate company that was listed on the NYSE under MCO. Then in 2007, Moody’s Corporation was split into two divisions. They are Moody’s Investors Service, the rating agency, and Moody’s Analytics, with all of its other products.

Moody’s Corporation - Understanding Moody’s Financial Services

Understanding Moody’s

Moody’s assigns ratings to bonds, stock, and state entities, and investors pay close attention to these ratings. Moody’s ratings range from AAA, which is the highest grade. For the top quality issuer with the lowest risk.  Down to C, which is mostly given to securities that are in default. With little chance for recovery of principal or interest.

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History of Moody’s

Moody’s history dates back to two publishing companies. Established by John Moody, the inventor of modern bond credit ratings. It was first published in 1900 by John Moody.  Nine years before he founded Moody’s Corporation. Known initially as Moody’s Manual of Industrial and Securities. It became Moody’s Manual of Railroads and Corporation Securities. Then by Moody’s Analyses of Investments.

Moody published his first market assessment in 1900, known as Moody’s Manual of Industrial and Miscellaneous Securities, and established John Moody & Company. The publication offered statistics that relate to stocks and bonds of state agencies, mining, utilities, and food companies. The publication saw early success and sold out its first print run in its first two months.

Moody’s Manual became a  known work by 1903. However, the 1907 money crisis brought several changes in the market, esp the creation of the Federal Reserve System. Thus Moody was forced to sell his business, because of a shortage of capital. In 1909, Moody returned with a new work solely focused on railroad bonds, Analysis of Railroad Investments, and a new company, Moody’s Analyses Publishing Company.

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By 1962, Moody’s Investors Service was bought by Dun & Bradstreet. This is a firm engaged in the related field of credit reporting, even though they continue to operate largely as separate companies. Moody’s superior outcome by the late 1990s compared to its parent company brought investor pressure to separate the outfits. Dun & Bradstreet in December 1999 announced it would spin off Moody’s Investors Service into a separate publicly-traded company. On September 30, 2000, the spin-off was ended.

Moody’s Ratings

Ever since John Moody devised the first bond ratings more than a century ago, Moody’s rating systems have greatly evolved. The corporation’s rating system has evolved in response to the high depth and breadth of the global capital markets. Much of the work in Moody’s rating system, is a result of a change to market needs for clarity around the issues of credit risk. It may also be a response to demands for finer distinctions in rating. Thus Moody’s Rating Symbols and are timely updated.

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