Abstract
AbstractThe paper examines the reputation effect of credit rating agencies (CRAs) in China. We find a negative association between CRAs’ reputation and public bonds’ offering yield spreads after controlling for endogeneity. Analyses of the correlation between CRA reputation and bond return volatility in the aftermarket and cross‐sectional variations of reputation effects alongside a host of information environment proxies for issuers, we identify the information channel through which CRA reputation plays its role. This is further supported when we utilize an exogenous event, the introduction of an independent CRA (the China Bond Rating Co. Ltd), to explore the potential changes of the reputation effect.
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