Credit Ratings by Foreign and Domestic Agents and Security Issuance Decisions

Dimitrios Gounopoulos; Yilmaz Guney; Jingsi Leng

doi:10.2139/ssrn.3704542

Credit Ratings by Foreign and Domestic Agents and Security Issuance Decisions

Dimitrios Gounopoulos, Yilmaz Guney, Jingsi Leng

Research output: Working paper/Preprint › Preprint › peer-review

Abstract

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.

Original language	English
Publisher	Social Science Research Network (SSRN)
Number of pages	54
DOIs	https://doi.org/10.2139/ssrn.3704542
Publication status	Published - 5 Jan 2021

Keywords

Credit ratings
state-owned enterprises
political connections
inflated ratings

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.2139/ssrn.3704542

Cite this

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N2 - 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.

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KW - Credit ratings

KW - state-owned enterprises

KW - political connections

KW - inflated ratings

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M3 - Preprint

BT - Credit Ratings by Foreign and Domestic Agents and Security Issuance Decisions

PB - Social Science Research Network (SSRN)

ER -

Credit Ratings by Foreign and Domestic Agents and Security Issuance Decisions

Abstract

Keywords

UN SDGs

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