Does the Nationally Recognized Statistical Rating Organization Certification Matter for Japanese Credit Rating Agencies?

38 Pages Posted: 9 Jan 2021

See all articles by Soku Byoun

Soku Byoun

Baylor University

Seung Hun Han

Korea Advanced Institute of Science and Technology (KAIST) - Department of Management Science

Yoon S. Shin

Loyola University Maryland

Date Written: November 19, 2020

Abstract

The SEC’s NRSRO designation for Japanese credit rating agencies is suitable for examining certification and monitoring effects, as Japanese domestic bond markets are not subject to SEC regulations. We find that the certification increased the market share of new NRSROs (R&I and JCR) compared to that of incumbent NRSROs (S&P and Moody’s). Moreover, bond issues rated by newly certified NRSROs obtained lower yields and their ratings became relatively more informative for predicting the yield spread after the NRSRO designation. Our findings suggest that the NRSRO designation enhances the reputation of newly certified NRSROs and the value of their ratings information.

Keywords: Credit Rating Agency; SEC Regulation; Certification; Competition; Market Share

JEL Classification: G10; G14; G15

Suggested Citation

Byoun, Soku and Han, Seung Hun and Shin, Yoon S., Does the Nationally Recognized Statistical Rating Organization Certification Matter for Japanese Credit Rating Agencies? (November 19, 2020). Journal of Financial Markets, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3733624

Soku Byoun (Contact Author)

Baylor University ( email )

Department of Finance Insurance & Real Estate
P.O.Box 98004
Waco, TX 76712
254-710-7849 (Phone)

Seung Hun Han

Korea Advanced Institute of Science and Technology (KAIST) - Department of Management Science ( email )

291 Daehak-ro(373-1 Guseong-dong), Yuseong-gu
Daejeon, 305-701
Korea, Republic of (South Korea)

Yoon S. Shin

Loyola University Maryland ( email )

Department of Finance
Baltimore, MD 21210
United States

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