Do Bond Issuers Shop for Favorable Credit Ratings?

Management Science, Forthcoming

64 Pages Posted: 22 Nov 2010 Last revised: 9 Jul 2019

Date Written: June 28, 2019


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 towards 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.

Keywords: Ratings shopping, credit rating agencies, corporate bonds, regulation

JEL Classification: G10, G14, G18, G20, G24, G28, G30, G35, G38

Suggested Citation

Kronlund, Mathias, Do Bond Issuers Shop for Favorable Credit Ratings? (June 28, 2019). Management Science, Forthcoming, Available at SSRN: or

Mathias Kronlund (Contact Author)

Tulane University ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

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