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This paper examines the relative importance of a shock to expected cash flows (i.e., cash-flow news) and a shock to expected discount rates (i.e., discount-rate news) in credit rating changes. Specifically, we use a Vector Autoregressive model to implement the return decomposition of Campbell and Shiller (Review of Financial Studies, 1, 1988, 195) and Vuolteenaho (Journal of Finance, 57, 2002, 233) to extract cash-flow news and discount-rate news from stock returns at the firm-level. We find that credit rating changes are, on average, more strongly associated with cash-flow news than with discount-rate news, consistent with cash-flow news being more permanent than discount-rate news. We further find that both cash-flow news and discount-rate news are more strongly related to credit rating changes when they convey negative information about firm value. This asymmetric association is consistent with the non-linear nature of default risk and with the fact that rating agencies incorporate bad news sooner than good news into their rating revisions. This paper contributes to the literature by providing evidence on the relative importance of cash-flow news and discount-rate news in the credit rating process.