Does the Nationally Recognized Statistical Rating Organization Certification Matter for Japanese Credit Rating Agencies?
38 Pages Posted: 9 Jan 2021
Date Written: November 19, 2020
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: Suggested Citation