Professor Guochao Yang, a researcher of the Base, has published a collaborative paper titled "Research on the Effectiveness of Credit Rating System in China's Bond Market" in  Economic Research Journal

Abstract:

The validity of credit rating system in Chinese bond market is questioned, and the prominent problem lies in the possibility of higher bond rating by rating agencies. However, the higher rating may be the result of collusion between rating agencies and issuers, or it may be a rational choice made by rating agencies based on effective interpretation of private information of issuers. Therefore, this article studies whether the rating adjustment of credit rating agencies affects the bond credit spread, so as to evaluate the effectiveness of our country's bond credit rating system. The study found that higher (lower) ratings by credit rating agencies significantly reduced (higher) bond spreads, a finding that held even after taking into account various robustness tests; In this paper, the "Dagong International Punishment" incident is used to test the placebo, and the novel coronavirus outbreak is used to construct the exogenous impact of private information. The results show that the higher rating is more rational choice based on the effective interpretation of the private information of the issuer, that is, the credit rating of Chinese bonds is effective on the whole. However, it is found that professional competence of rating analysts, rigid payment environment of bond market and payment mode competition of rating agencies will affect the validity of our credit rating system.

Key Words: bond credit rating; Rating quality; Private information; Rigid payment; Rating analyst;

Link: Economic Research Editorial Office (erj.cn)

Teacher profile

Guochao Yang, Professor and doctoral supervisor of Accounting School of Zhongnan University of Economics and Law, Director of Big Data Center of "Income Distribution and Modern Financial Discipline Innovation and Introduction Base" of Ministry of Education and Ministry of Science and Technology, Wen LAN Young Scholar, PWC "Siliu Young Scholar", international high-end accounting talents of Ministry of Finance, Doctor of Department of Finance and Finance of School of Management of Fudan University, Certified Public accountant in Canada and China. His research interests are institutional and non-institutional factors in stock market, bond market and public policy. His papers have been published in Economic Research Journal, Management World, China Economic Journal, The Journal of World Economy, Journal of Management Sciences in China, Chinese Industrial Economics, Journal of Financial Research, Accounting Research , China Economic Quarterly International Journal of Accounting Studies and other authoritative academic journals at home and abroad. He has won the Hong Yinxing Economics Award (Youth), the Best Paper of the Year Award of PwC3535 Forum, and China Financial Research The Best Paper Award of Conference (CFRC), the First Prize of Social Science Outstanding Achievements of Hubei Province, the first prize of Social Science Outstanding Achievements of Wuhan City, the National MPAcc Excellent Teaching Cases and the Fine Courses Award of Ping An Education Fund of China, etc. As the leader of major projects of the National Social Science Fund, he presided over key projects of the National Social Science Fund, youth projects of the National Self-Science Fund, youth projects of the Humanities and Social Science Fund of the Ministry of Education and a number of projects in Hubei Province.