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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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    Cited by:
    1. Arthur Allen & Donna Dudney, 2008. "The Impact of Rating Agency Reputation on Local Government Bond Yields," Journal of Financial Services Research, Springer, Springer, vol. 33(1), pages 57-76, February.
    2. Alsakka, Rasha & ap Gwilym, Owain, 2010. "Leads and lags in sovereign credit ratings," Journal of Banking & Finance, Elsevier, vol. 34(11), pages 2614-2626, November.
    3. Xia, Han, 2014. "Can investor-paid credit rating agencies improve the information quality of issuer-paid rating agencies?," Journal of Financial Economics, Elsevier, Elsevier, vol. 111(2), pages 450-468.
    4. Böninghausen, Benjamin & Zabel, Michael, 2013. "Credit Ratings and Cross-Border Bond Market Spillovers," MPRA Paper 47390, University Library of Munich, Germany.
    5. Duan, Jin-Chuan & Van Laere, Elisabeth, 2012. "A public good approach to credit ratings – From concept to reality," Journal of Banking & Finance, Elsevier, vol. 36(12), pages 3239-3247.
    6. Patrick Van Roy, 2005. "Is there a difference in treatment between solicited and unsolicited bank ratings and, if so, why?," Finance, EconWPA 0509012, EconWPA.
    7. Shen, Carl Hsin-han, 2014. "Pecking order, access to public debt market, and information asymmetry," International Review of Economics & Finance, Elsevier, Elsevier, vol. 29(C), pages 291-306.
    8. Alsakka, Rasha & ap Gwilym, Owain, 2012. "Foreign exchange market reactions to sovereign credit news," Journal of International Money and Finance, Elsevier, Elsevier, vol. 31(4), pages 845-864.
    9. 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 CREGO, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations 1070603, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.
    10. 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.
    11. Blumenstock, Hendrik & von Grone, Udo & Mehlhorn, Marc & Merkl, Johannes & Pietz, Marcus, 2012. "Einflussfaktoren von CDS-Spreads als Maß für das aktuelle Bonitätsrisiko: Liefert das Rating eine Erklärung?," Bayreuth Working Papers on Finance, Accounting and Taxation (FAcT-Papers) 2012-03, University of Bayreuth, Chair of Finance and Banking.

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