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Explaining credit rating differences between Japanese and U.S. agencies

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  • Yoon S. Shin
  • William T. Moore

Abstract

We compare credit ratings assigned to Japanese firms by the two leading U.S. rating agencies and the two leading Japanese agencies. Our goal is to investigate the complaint that the U.S. agencies Moody's and Standard and Poor's (S&P) ignore special corporate governance features of Japanese firms, i.e., keiretsu affiliation. We find that it is true that ratings of Japanese firms by the U.S. agencies are systematically lower than those assigned by Japanese raters. However, the reasons for the differences are not found to be related to keiretsu affiliation. Thus, we reject one of the prominent reasons for rating differences put forth by managers of Japanese firms. This leaves open the question of what drives the difference. The phenomenon is clearly consistent with more general home bias documented in previous work.

Suggested Citation

  • Yoon S. Shin & William T. Moore, 2003. "Explaining credit rating differences between Japanese and U.S. agencies," Review of Financial Economics, John Wiley & Sons, vol. 12(4), pages 327-344.
    • Handle: RePEc:wly:revfec:v:12:y:2003:i:4:p:327-344
    DOI: 10.1016/j.rfe.2003.07.004
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    References listed on IDEAS

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    4. Dion Bongaerts & Martijn Cremers & William Goetzmann, 2008. "Tiebreaker: Certification and Multiple Credit Ratings," Yale School of Management Working Papers amz2394, Yale School of Management, revised 01 Sep 2009.

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