Abstract
The subprime mortgage crisis of 2007-2008 has led major economies to reform their credit rating regulations, and China is not an exception. This paper employs a difference-in-difference research design to investigate whether reputational capital affects credit rating agencies. The first market-oriented evaluation of the Chinese inter-bank bond market is chosen as the source of the exogenous reputational shock. Using the medium term notes rated by China Chengxin International Credit Rating as benchmarks, we identify a causal relationship revealing that the average yield spread at the issuance of medium term notes, as rated by China Lianhe Credit Rating, increases by between 0.22% and 0.33% percent due to its decreased reputational capital. Our research provides favorable evidence for the recent reform measures that aim to increase the disciplinary power of reputational capital.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
