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Journal of Finance Vol. 67 No. 1 2012

Tiebreaker: Certification and Multiple Credit Ratings

Dion Bongaerts; K. J. Martijn Cremers; William N. Goetzmann1,2,3,4,5,6,7,8,9

1 MARK Resources (United States) · 2 Senologic Hellenic Society · 3 Swanson Center · 4 Rongsheng Petrochemical (China) · 5 Phu Yen University · 6 Ospedale Vito Fazzi · 7 GF Jooste Hospital · 8 American Finance Association · 9 Erasmus University Rotterdam

open access

Abstract

This paper explores the economic role credit rating agencies play in the corporate bond market. We consider three existing theories about multiple ratings: information production, rating shopping, and regulatory certification. Using differences in rating composition, default prediction, and credit spread changes, our evidence only supports regulatory certification. Marginal, additional credit ratings are more likely to occur because of, and seem to matter primarily for, regulatory purposes. They do not seem to provide significant additional information related to credit quality.

DOI
10.1111/j.1540-6261.2011.01709.x
Volume
67
Issue
1
Pages
113-152
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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