China's Emerging Credit Rating Industry: The Official Foundations of Private Authority

2008 ◽  
Vol 193 ◽  
pp. 65-83 ◽  
Author(s):  
Scott Kennedy
Keyword(s):  
Financial Markets ◽  
Stock Markets ◽  
Credit Rating ◽  
Credit Rating Agencies ◽  
Bond Ratings ◽  
Trade Associations ◽  
Rating Agencies ◽  
Market Participants ◽  
Private Authority ◽  
Private Actors

AbstractAlthough China has had difficulty improving the performance of its banks and stock markets, it has struggled even more to develop a credit rating industry. Credit rating agencies (CRA), which provide bond ratings, are vital to financial markets in advanced capitalist countries, but China's credit rating companies are weak and have had little influence over the behaviour of those who issue or invest in bonds. Some argue that CRAs gain authority through their strong reputation in the eyes of market participants, but the experience of rating agencies in China supports evidence from elsewhere that their private authority is largely dependent on government mandate, a benefit China's CRAs have only recently begun to enjoy. Many private actors, from trade associations to charity groups, are struggling to gain public influence in China, but credit rating agencies may be the best barometer to measure the Chinese government's general stance towards private authority.

scholarly journals Analysis of Determinants of Split Ratings and Rating Conservativeness between Japanese and US Credit Rating Agencies

2013 ◽  
Vol 3 (1) ◽  
pp. 182 ◽  
Author(s):  
Yoshiki Shimizu ◽  
Junghee Lee ◽  
Hideki Takei
Keyword(s):  
Credit Rating ◽  
Multivariate Regression Analysis ◽  
Credit Rating Agencies ◽  
Bond Ratings ◽  
Rating Agencies ◽  
Thomson Reuters ◽  
Asset Liquidity ◽  
The Us ◽  
Japanese Companies ◽  
Split Ratings

In the previous paper, we confirmed the existence of the split ratings between Japanese and US credit rating agencies (CRAs). Our study did not support early studies suggesting that the split ratings were merely random occurrences. Rather, our findings suggested that the split ratings occurring between Japanese and US CRAs were not random and frequently occurring. The Japanese CRA assigned less conservative ratings than the US CRAs. In this paper, we performed the multivariate regression analysis to find variables which would differentiate the degree of rating conservativeness. Our samples were 192 Japanese companies which were assigned their ratings by Japanese and US credit rating agencies. We used 10-year bond ratings of these companies from 2000 and 2009. Our data sources were Nikkei NEEDS-Financial Quest for Japanese ratings and financial information and Thomson Reuters Datastream for US ratings. All financial data of the 192 firms were collected from Nikkei NEEDS-Financial Quest. According to our findings, Japanese agency seems to put higher weight on ROA than US agencies while all agencies seem to use variables such as asset, liquidity, and leverage to assign ratings. We assume that this is the main variable that has differentiated the degree of rating conservativeness.

Part II The Financial Crisis of 2007–2011, 6 Market and Regulatory Failure

2018 ◽  
Author(s):  
Mccormick Roger ◽  
Stears Chris
Keyword(s):  
Risk Management ◽  
Financial Crisis ◽  
Credit Risk ◽  
Financial Market ◽  
Credit Rating ◽  
Third Party ◽  
Credit Rating Agencies ◽  
Rating Agencies ◽  
Market Participants ◽  
Regulatory Failure

This chapter first discusses the origins of the financial crisis, highlighting practice of ‘packaging and selling’ credit risk by financial market participants that led up to the crisis. It argues that although, in retrospect, many aspects of that practice look very bad indeed, the idea that banks might originate a credit exposure and then transfer the credit risk attached to it to a third party was, before the financial crisis, considered to be part and parcel of sound risk management. The discussion then turns to credit-rating agencies. Analysis of the financial crisis and ‘what went wrong’ has shown that rating agencies were too generous with their rating of many of the structured products that contributed to the collapse.

Part VII International Securities, Including Markets and Clearing Systems, 21 Credit Rating Agencies

2021 ◽  
Author(s):  
Eborall Charlotte
Keyword(s):  
Information Asymmetry ◽  
Credit Rating ◽  
Global Financial Crisis ◽  
Credit Ratings ◽  
The United States ◽  
Credit Rating Agencies ◽  
Rating Agencies ◽  
Market Participants ◽  
The Global Financial Crisis ◽  
Independent Assessment

This chapter concentrates on credit rating agencies (CRAs), which play a key role in financial markets. It explains how CRAs help reduce information asymmetry between investors and issuers by providing an independent assessment of the relative creditworthiness of countries or companies. It also describes how CRA's role has expanded significantly in recent decades with financial globalization, such as the introduction of references to credit ratings in regulations and the embedding by market participants of ratings in their operating procedures, investment decisions, and contracts. This chapter identifies the heavy reliance on CRAs as one of the main contributors to the global financial crisis in 2008. It also talks about the efficacy of CRAs' credit ratings after 2008, in which regulators in the United States (US) and Europe introduced new regulations intended to address the reliability of CRAs' predictions of probability of default.

Too little, too late? Role of credit rating agencies in the Amtek AUTO default

2017 ◽  
Vol 7 (4) ◽  
pp. 1-22
Author(s):  
Shagun Thukral ◽  
Sunder Korivi ◽  
Dipasha Sharma ◽  
Dipali Krishnakumar
Keyword(s):  
Financial Markets ◽  
Credit Rating ◽  
Credit Rating Agencies ◽  
Fixed Income ◽  
Red Flags ◽  
Content Type ◽  
Rating Agencies ◽  
Markets And Institutions ◽  
Analysis Process ◽  
Credit Analysis

Subject area Fixed Income markets, Financial Markets and Institutions. Study level/applicability This case can be used in a postgraduate finance course such as an MBA and executive program for courses such as Fixed Income Markets and Financial Markets and Institutions. Case overview In late August 2015, the sudden downgrade and eventual default of Amtek AUTO Ltd (Amtek) on its debentures upset mutual fund investors and regulators. Questions were raised about the credit rating agencies and their lack of timely action as well as about the independent credit analysis followed by fund houses to protect the interests of investors. One such investor, Suresh Nair, decided to gather all possible available information on Amtek to determine whether it was sheer negligence on the part of all parties involved or if Amtek was in fact in a situation of sudden distress. The case seeks to highlight the credit analysis process, while looking out for red flags to identify potential default or financial stress in a company. Expected learning outcomes To understand the credit analysis process through a fundamental analysis process. To analyze and interpret the financial position of the company through various financial ratios. Identifying “red flags” while evaluating a potential credit that pose as “risks” to credit assessment. Understanding the role and relevance of credit rating agencies in the bond market. Supplementary materials Teaching Notes are available for educators only. Please contact your library to gain login details or email [email protected] to request teaching notes. Subject code CSS 1: Accounting and Finance

scholarly journals Information as a condition of justice in financial markets: The regulation of credit-rating agencies

2017 ◽  
Author(s):  
Boudewijn de Bruin
Keyword(s):  
Credit Risk ◽  
Financial Markets ◽  
Institutional Investors ◽  
Credit Rating ◽  
Credit Rating Agencies ◽  
Informational Needs ◽  
Sources Of Information ◽  
Rating Agencies ◽  
Mortgage Backed Securities

This chapter argues for deregulation of the credit-rating market. Credit-rating agencies are supposed to contribute to the informational needs of investors trading bonds. They provide ratings of debt issued by corporations and governments, as well as of structured debt instruments (e.g. mortgage-backed securities). As many academics, regulators, and commentators have pointed out, the ratings of structured instruments turned out to be highly inaccurate, and, as a result, they have argued for tighter regulation of the industry. This chapter shows, however, that the role of credit-rating agencies in achieving justice in finance is not as great as these commentators believe. It therefore argues instead for deregulation. Since the 1930s, lawgivers have unjustifiably elevated the rating agencies into official, legally binding sources of information concerning credit risk, thereby unjustifiably causing many institutional investors to outsource their epistemic responsibilities, that is, their responsibility to investigate credit risk themselves.

scholarly journals Sovereign credit ratings and CDS spreads in Emerging Europe

Equilibrium ◽  
2020 ◽  
Vol 15 (3) ◽  
pp. 419-438
Author(s):  
Łukasz Dopierała ◽  
Daria Ilczuk ◽  
Liwiusz Wojciechowski
Keyword(s):  
Financial Markets ◽  
Credit Rating ◽  
Global Financial Crisis ◽  
Credit Ratings ◽  
Value Added ◽  
Credit Rating Agencies ◽  
Rating Agencies ◽  
Sovereign Credit ◽  
Sovereign Credit Ratings ◽  
The Impact

Research background: Sovereign credit ratings play an important role in determining any country’s access to the international debt market. During the global financial crisis and the European debt crisis, credit rating agencies were harshly criticized for the timing of their announcements regarding ratings downgrades and the ranges of those downgrades. Therefore, it is worth considering whether the sovereign credit rating is still a useful benchmark for investors. Purpose of the article: This article examines whether credit rating agencies still provide financial markets with new information about the solvency of governments in Emerging Europe countries. In addition, it describes the differences in the effect of particular types of rating events on financial markets and the impact of individual agencies on the market situation. Our study also focuses on evaluating these occurrences at different stages of the business cycle. Methods: This article uses data about ratings events that took place between 2008 and 2018 in 17 Emerging Europe economies. We took into consideration positive, neutral, and negative events related to ratings changes and the outlooks reported by Fitch Ratings, Moody’s, and Standard & Poor’s. We used a methodology based on event studies. In addition, we performed Wilcoxon signed-ranks test and used a logit model to determine the usefulness of cumulative adjusted credit default swap (CDS) spread changes in predicting the direction of ratings changes. Findings & Value added: Our research provides evidence that the CDS market reflects information regarding government issuers up to three months before ratings downgrades are announced. Information reported to the market by ratings agencies is only relevant in the short timeframe surrounding ratings downgrades and upgrades. However, positive credit rating changes convey more information to the market. We also found strong evidence that, in the post-crisis period, credit ratings provide markets with less information.

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