Tiebreaker: Certification and Multiple Credit Ratings
66 Pages Posted: 15 Sep 2009 Last revised: 12 Oct 2009
Date Written: September 2009
This paper explores the economic role credit rating agencies play in the corporate bond market. We consider three existing theories about multiple ratings: information production, rating shopping and regulatory certification. Using differences in rating composition, default prediction and credit spread changes, our evidence only supports regulatory certification. Marginal, additional credit ratings are more likely to occur because of, and seem to matter primarily for regulatory purposes, but do not seem to provide significant additional information related to credit quality.
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