Abstract:
Since 2014 a series of bond defaults have happened in Chinese bond market, leading to the criticism of the creditability of credit rating which is not empirically investigated in academic. Based on the bond defaults happened during 2014 to 2015 in China, the paper empirically finds that the related CRAs involving in bond defaults become more aggressive in risk evaluation in order to keep the clients and enlarge their market shares rather than to be more conservative and tighten the rating. However, despise the opportunistic behavior of those CRAs, their market share indeed shrinks due to their involvement in those bond defaults since bond investors and issuers punish those CRAs. Moreover, the creditability of credit rating given by those CRAs is also in query that the impact of credit rating on bond financing cost also becomes smaller.
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