Do Bond Issuers Shop for Favorable Credit Ratings?

• 成果类型: Article
• 署名作者: Kronlund, Mathias
• 署名单位: University of Illinois System; University of Illinois Urbana-Champaign
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2019.3440
• 发表日期: 2020
• 关键词: Ratings shopping; Credit ratings; Corporate bonds; Rating agencies

摘要

This paper provides evidence of ratings shopping in the corporate bond market. By estimating systematic differences in agencies' biases about any given firm's bonds, I show that new bonds are more likely to be rated by agencies that are positively biased toward the firm-a pattern that is strongest among bonds that have only one rating. The paper also shows that issuers often delay less favorable ratings until after a bond is sold. Consistent with theoretical models of ratings shopping, these effects are strongest among more complex bonds that are more difficult to rate. Bonds with upward-biased ratings are more likely to be downgraded and default, but investors account for this bias and demand higher yields when buying these bonds.