Assessing Credit Rating Agencies by Bond Issuers and Institutional Investors

30 Pages Posted: 9 Nov 2001

See all articles by Sattar Mansi

Sattar Mansi

Virginia Polytechnic Institute & State University

H. Kent Baker

American University - Kogod School of Business

Date Written: June 18, 2001

Abstract

We examine how a sample of publicly traded corporate bond issuers and institutional investors, namely corporate bond funds, assess the four major nationally recognized credit rating agencies and their role in capital markets. The results show that these issuers and institutional investors differ dramatically in their assessments about rating agencies. Specifically, the majority of institutional investors require, as a matter of formal policy, only one rating when they buy rated corporate bonds, but most issuers obtain two or more ratings. Issuers and institutional investors also differ in their assessments about whether ratings accurately reflect creditworthiness and whether agencies maintain timely ratings. In aggregate, the results suggest that differences between bond issuers and institutional investors reflect the different roles that rating agencies provide in the market place.

Keywords: Credit Ratings, Credit Rating Agencies, Bond Issuers, Institutional Investors

JEL Classification: N2

Suggested Citation

Mansi, Sattar and Baker, H. Kent, Assessing Credit Rating Agencies by Bond Issuers and Institutional Investors (June 18, 2001). Available at SSRN: https://ssrn.com/abstract=288683 or http://dx.doi.org/10.2139/ssrn.288683

Sattar Mansi (Contact Author)

Virginia Polytechnic Institute & State University ( email )

H. Kent Baker

American University - Kogod School of Business ( email )

4400 Massachusetts Avenue NW
Washington, DC 20816-8044
United States
202-885-1949 (Phone)
202-885-1992 (Fax)

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