Tiebreaker: Certification and Multiple Credit Ratings

Dion Bongaerts, K.J. Martijn Cremers, William N. Goetzmann

NBER Working Paper No. 15331
Issued in September 2009
NBER Program(s):   CF

This paper explores the economic role credit rating agencies play in the corporate bond market. We consider three existing theories about multiple ratings: information production, rating shopping and regulatory certification. Using differences in rating composition, default prediction and credit spread changes, our evidence only supports regulatory certification. Marginal, additional credit ratings are more likely to occur because of, and seem to matter primarily for regulatory purposes, but do not seem to provide significant additional information related to credit quality.

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This paper was revised on December 5, 2011

Acknowledgments

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