Do Bond Issuers Shop for Favorable Credit Ratings?

65 Pages Posted: 22 Nov 2010 Last revised: 30 Jan 2016

Mathias Kronlund

University of Illinois at Urbana-Champaign

Date Written: January 16, 2016


I provide evidence of ratings shopping among corporate bonds. Firms are more likely to publish ratings from an agency that rates their bonds relatively favorably, and firms are also more likely to delay publication of any unfavorable ratings. This bias is strongest among junior and long-term bonds that are more complex to rate, and in times when the Baa--Aaa spread is high. I also show that firms strategically manage the number of ratings near a regulation-based threshold. Bonds with a shopping-biased rating are more likely to default, but investors account for this bias and demand higher yields for these bonds.

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

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

Suggested Citation

Kronlund, Mathias, Do Bond Issuers Shop for Favorable Credit Ratings? (January 16, 2016). Available at SSRN: or

Mathias Kronlund (Contact Author)

University of Illinois at Urbana-Champaign ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

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