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Assessing Credit Rating Agencies by Bond Issuers and Institutional Investors

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Author Info

  • H. Kent Baker

    (American University Kogod School of Business,)

  • Sattar A. Mansi
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    Abstract

    We examine how a sample of publicly traded corporate bond issuers and institutional investors assess the four major nationally recognized rating agencies and their role in capital markets. The results show that issuers and investors differ dramatically in their assessments about rating agencies. Specifically, the majority of institutional investors require only one rating when they buy rated corporate bonds, but most issuers obtain two or more ratings. Issuers and investors also differ in their assessments about whether ratings accurately reflect creditworthiness and timeliness. The results suggest that differences reflect the different roles that rating agencies provide in the market place. Copyright Blackwell Publishers Ltd 2002.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Journal of Business Finance & Accounting.

    Volume (Year): 29 (2002)
    Issue (Month): 9&10 ()
    Pages: 1367-1398

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    Handle: RePEc:bla:jbfnac:v:29:y:2002:i:9&10:p:1367-1398

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0306-686X

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    Cited by:
    1. Patrick Van Roy, 2005. "Is there a difference in treatment between solicited and unsolicited bank ratings and, if so, why?," Finance 0509012, EconWPA.
    2. Maxime Merli & Alain Schatt, 2007. "Are there contagion or competition effects for non rated firms?The case of successive bond rating downgrades of Alcatel," Working Papers FARGO 1070603, Université de Bourgogne - Crego EA 7317/Fargo (Research center in Finance,organizational ARchitecture and GOvernance).
    3. Maxime Merli & Alain Schatt, 2003. "Contagion effects of successive bond rating downgrades," Working Papers of LaRGE Research Center 2003-02, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg (France).

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