There has been considerable controversy over unsolicited credit ratings in recent years. Some dissatisfied issuers allege that unsolicited ratings are biased downward in contrast to solicited ratings. This is the first empirical study to analyze the controversy using pooled time-series cross-sectional data of 265 firms in 15 countries from Standard and Poor’s Ratings Services (S&P’s) during the period of 1998–2000. The results demonstrate that unsolicited ratings are lower. On the other hand, I also find that those issuers who choose not to obtain rating services from S&P’s have weaker financial profiles. Although the difference in ratings can be explained by this significant self-selection bias, results of the Japanese sub-sample indicate that unsolicited ratings are still lower than solicited ratings after controlling for differences in sovereign risk and key financial characteristics.

We investigate the nascent but fast-growing Chinese bond market and credit rating industry. We find Chinese bond ratings are informative and significantly correlated with bond offering yields. In addition, the Chinese bond investors distinguish ratings from different credit rating agencies (CRAs), demanding lower yields on bonds rated by global-partnered CRAs. However, the empirical results suggest that the rating scales used by Chinese CRAs are not comparable to those of international CRAs. Furthermore, Chinese CRAs have very broad rating scales and pool bonds with significantly different default risks into a single rating category, resulting in over 90% of bonds in only three rating categories.