The impact of issuer-pay on corporate bond rating properties: Evidence from Moody's and S&P's initial adoptions

• 成果类型: Article
• 署名作者: Bonsall, Samuel B.
• 署名单位: University System of Ohio; Ohio State University
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2014.01.001
• 发表日期: 2014
• 关键词: Information asymmetry; MARKET; ask; difference; CHOICE; MODEL; FIRMS

摘要

This study examines whether and how the properties of corporate bond ratings change following Moody's and S&P's adoptions of the issuer-pay business model in the early 1970s. Regulators and debt market observers have criticized the issuer-pay model for creating an independence problem. However, the issuer-pay model allows for economic bonding between rating agencies and issuers through explicit contractual arrangements, which should improve the flow of nonpublic information. Using a difference-in-difference research design, I find that more optimistic ratings by issuer-pay rating agencies predict greater future profitability, differences between the ratings of issuer-pay and investor-pay rating agencies are associated with narrower secondary bond market bid-ask spreads, and that issuer-pay rating agencies become relatively more accurate and timely predictors of default compared to investor-pay agencies after the adoption of issuer-pay. These results reinterpret the recent findings of optimistic ratings by Jiang et al. (2012) as consistent with more informative bond ratings. (C) 2014 Elsevier B.V. All rights reserved.