Ratings Quality and Borrowing Choice

• 成果类型: Article
• 署名作者: Badoer, Dominique C.; Demiroglu, Cem; James, Christopher M.
• 署名单位: University of Illinois System; University of Illinois Chicago; University of Illinois Chicago Hospital; Koc University; State University System of Florida; University of Florida
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12820
• 发表日期: 2019
• 页码: 2619-2665
• 关键词: Financial intermediation; INFORMATION; certification; FIRMS

摘要

Past studies document that incentive conflicts may lead issuer-paid credit rating agencies to provide optimistically biased ratings. In this paper, we present evidence that investors question the quality of issuer-paid ratings and raise corporate bond yields where the issuer-paid rating is more positive than benchmark investor-paid ratings. We also find that some firms with favorable issuer-paid ratings substitute public bonds with borrowings from informed intermediaries to mitigate the lemons discount associated with poor quality ratings. Overall, our results suggest that the quality of issuer-paid ratings has significant effects on borrowing costs and the choice of debt.