Motivated by recent criticism of incompetence of credit agencies, this study investigates whether credit rating agencies respond to companies’ financial restatements. We find that raters downgrade their ratings of restating companies, particularly the ones with higher leverage, lower cash flows and smaller sizes. These downgrades are stronger when the restatements are more severe, as reflected by the magnitude of misstatement amounts and no concurrent disclosure of other good news. Further analyses show that downgrade ratings are more associated with restatements in the post-SOX period for post-SOX misstatements. Our results suggest that credit raters pay attention to financial restatements mainly after Enron, consistent with the expectation that public criticism and the SOX enactment drive rating agencies more responsive to issuers’ financial restatements. Also, the post-SOX period misstatements are considered more unfavorable than the pre-SOX period misstatements by raters.