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Cross‐Listed Bonds, Information Asymmetry, and Conservatism in Credit Ratings

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  • YIGIT ATILGAN
  • ALOKE (AL) GHOSH
  • MENG YAN
  • JIEYING ZHANG

Abstract

We propose information asymmetry as an additional explanation for rating conservatism. Because information asymmetry is likely higher for cross‐listed bonds than for U.S. bonds, we expect and find that cross‐listed bonds are rated more conservatively than U.S. domestic bonds at issuance. Further, cross‐listed bonds receive less frequent upgrades and take longer to be upgraded after issuance. Because lower ratings might also reflect higher default risk based on agencies’ private information, we conduct additional tests to discriminate between the rating conservatism and private information explanations. The results are consistent with ratings conservatism and inconsistent with the private information explanation.

Suggested Citation

  • Yigit Atilgan & Aloke (Al) Ghosh & Meng Yan & Jieying Zhang, 2015. "Cross‐Listed Bonds, Information Asymmetry, and Conservatism in Credit Ratings," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(5), pages 897-929, August.
    • Handle: RePEc:wly:jmoncb:v:47:y:2015:i:5:p:897-929
    DOI: 10.1111/jmcb.12232
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    2. Wai Choi Lee & Jianfu Shen & Tsun Se Cheong & Michal Wojewodzki, 2021. "Detecting conflicts of interest in credit rating changes: a distribution dynamics approach," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-23, December.
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    4. Jan Hendrik Fisch & Bjoern Schmeisser, 0. "Phasing the operation mode of foreign subsidiaries: Reaping the benefits of multinationality through internal capital markets," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 0, pages 1-33.
    5. Lindner, Thomas & Muellner, Jakob & Puck, Jonas, 2016. "Cost of Capital in an International Context: Institutional Distance, Quality, and Dynamics," Journal of International Management, Elsevier, vol. 22(3), pages 234-248.

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