Credit rating agencies and corporate lifecycles\r\nhave been a subject of interest for practitioners and\r\nacademics during the recent period of worldwide\r\neconomic and debt crises. In this article, we examine what\r\ncorporate lifespan the credit rating agencies predict. We\r\nemploy the reliability theory commonly used in\r\nengineering and solve a Markov model based on the\r\ncredit rating transition matrices issued by the Standard &\r\nPoor�s rating agency. The results show that every\r\ncompany will eventually default in the long-term.\r\nHowever, the mean time to default differs according to\r\nthe initial conditions of the model, which are represented\r\nby the initial credit rating. We considered a company as\r\nhaving initial speculative grades of B and CCC/C and\r\ncalculated the mean time to default and the time after\r\nwhich the business can be considered safe, with a\r\nprobability of only 50%. We also determined the\r\nprobabilities of the individual rating grades. We suggest\r\nassessing corporate business cycles in probabilistic terms,\r\ntaking into account all possible states and initial\r\nconditions.
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