Differential Properties in the Ratings of Certified vs. Non-Certified Bond Rating Agencies

54 Pages Posted: 29 Sep 2004

See all articles by William H. Beaver

William H. Beaver

Stanford University

Catherine Shakespeare

University of Michigan - Stephen M. Ross School of Business

Mark T. Soliman

University of Southern California - Marshall School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: June 2006

Abstract

We examine whether the properties of bond ratings from certified agencies (designated by the SEC) differ from those of non-certified bond rating agencies. Bond ratings from non-certified agencies are used solely for investment advice. Certified ratings are used by a variety of constituents, many of whom write contracts incorporating these ratings. We find that the properties of the ratings from the two agency types differ in predictable ways. Our results show that the non-certified agency's ratings are consistent with their role of providing information to investors. The certified agency is generally more conservative, consistent with their significant role in contracting.

Keywords: Bond Ratings, Information Intermediaries, Contracting, NRSRO

JEL Classification: M41, M45, M49, J33, G29

Suggested Citation

Beaver, William H. and Shakespeare, Catherine and Soliman, Mark T., Differential Properties in the Ratings of Certified vs. Non-Certified Bond Rating Agencies (June 2006). Available at SSRN: https://ssrn.com/abstract=596626 or http://dx.doi.org/10.2139/ssrn.596626

William H. Beaver

Stanford University ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-4409 (Phone)
650-725-6152 (Fax)

Catherine Shakespeare (Contact Author)

University of Michigan - Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Mark T. Soliman

University of Southern California - Marshall School of Business ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

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