Abstract
In Malaysia, corporate debt securities are fairly ‘new’ and in 1990, the Rating Agency of Malaysia (RAM) was established to rate them. Initially, issuers were allowed to seek ratings voluntarily. This policy was the topic of an editorial in the November 1–15, 1991 issue of the publication Malaysian Business. The editorial recommended that debt securities in Malaysia should be mandatorily rated by RAM, thus providing investors with information about the likelihood of default by issuers. This paper presents an opposite view to the editorial and develops a model to justify a voluntary rating policy.
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