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Assessing Credit Rating Agencies by Bond Issuers and Institutional Investors
Author(s) -
Baker H. Kent,
Mansi Sattar A.
Publication year - 2002
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/1468-5957.00474
Subject(s) - issuer , credit rating , bond credit rating , business , institutional investor , bond , corporate bond , sample (material) , financial system , accounting , finance , credit risk , credit reference , corporate governance , chemistry , chromatography
We examine how a sample of publicly traded corporate bond issuers and institutional investors assess the four major nationally recognized rating agencies and their role in capital markets. The results show that issuers and investors differ dramatically in their assessments about rating agencies. Specifically, the majority of institutional investors require only one rating when they buy rated corporate bonds, but most issuers obtain two or more ratings. Issuers and investors also differ in their assessments about whether ratings accurately reflect creditworthiness and timeliness. The results suggest that differences reflect the different roles that rating agencies provide in the market place.