Credit Ratings by Foreign and Domestic Agents and Security Issuance Decisions

54 Pages Posted: 5 Jan 2021 Last revised: 13 Dec 2021

See all articles by Dimitrios Gounopoulos

Dimitrios Gounopoulos

University of Bath

Yilmaz Guney

Coventry University

Jingsi Leng

Hull University Business School (HUBS)

Date Written: August 14, 2019


We investigate the foreign and domestic credit ratings on Chinese seasoned equity offerings (SEOs). Our results indicate a negative association between acquiring credit ratings and SEO underpricing. Ratings from the international agent Moody’s and multiple ratings contribute more to reducing market uncertainty and underpricing than local rating agencies. This finding is attributed to the intense competition in the Chinese market, which exacerbates the conflicts of interest between local rating agencies and rated firms. The negative association disappears in state-owned enterprises (SOEs), in firms with political connections, and for issuers located in the specific economic development areas.

Keywords: Credit ratings, state-owned enterprises, political connections, inflated ratings

JEL Classification: G14, G24, G32

Suggested Citation

Gounopoulos, Dimitrios and Guney, Yilmaz and Leng, Jingsi, Credit Ratings by Foreign and Domestic Agents and Security Issuance Decisions (August 14, 2019). Available at SSRN: or

Dimitrios Gounopoulos (Contact Author)

University of Bath ( email )

School of Management,
Wessex House, Claverton Down
Bath, BA2 7AY
United Kingdom

Yilmaz Guney

Coventry University ( email )

Coventry, CV1 5FB
United Kingdom

Jingsi Leng

Hull University Business School (HUBS) ( email )

Hull, HU6 7RX
United Kingdom

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