Summary:
As a direct financing tool for companies, corporate bonds are an important aspect of deepening financial system reform and building a multilevel capital market. Establishing a credit rating system helps to classify issuers' credit risk using rating symbols, evaluate their solvency, provide incremental information to the bond market, and reduce information asymmetry. However, whether credit rating agencies (CRAs) can transfer information to the bond market carefully and objectively is still controversial. On the one hand, the network of interests between CRAs and issuers leads to a decrease in the information content of credit ratings. On the other hand, CRAs are constrained by their reputations and will forgo their short-term gains in favor of communicating true information about the bond market. Therefore, CRAs choose to publish credit rating downgrades when they believe that the negative information about issuers credibly damages their reputation. Financial restatements by companies indicating their misrepresentation of prior years' financial information intuitively and clearly illustrate the lack of credibility of the restated financial reports. This provides a unique setting in which to study whether credit rating adjustments reflect issuers' true financial information. We distinguish between the years of the financial misstatement and restatement announcements. If the CRA downgrades the credit rating in the financial misstatement year based on the issuer's private information, the result can prove that the credit rating adjustment reflects the issuer's true financial information. We use data from Chinese A-share listed companies with issuer-level long-term credit ratings and find that the rating agencies significantly downgrade issuers' credit ratings in financial misstatement years, rather than in restatement announcement years. This result indicates that credit rating downgrades reflect issuers' real financial information prospectively. Our results hold in the presence of alleviating endogenous concerns and applying other robustness tests. In additional tests, when the issuer's financial misstatement involves their earnings, their credit rating is downgraded more fiercely. In a channel test, we find that protecting the reputation of the credit agency is the main channel by which credit rating adjustments reflect issuers' real financial information. We further find that credit rating downgrades result in investors' negative reactions to stock prices. We contribute to the literature in the following ways. First, we use a unique setting in which issuers' financial misstatements may be restated in subsequent years. Thus, we discuss the behavior of CRAs in financial misstatement years. The results support the effectiveness of credit ratings. Cheng and Subramanyam (2008) and Bonsall IV et al. (2018) focus on the impact of issuers' public information in their credit rating assessments. We still do not know how the CRAs react to private information because of the lack of private information data. Following previous studies, we find that the credit rating adjustments include the issuers' real financial information obtained by CRAs. This finding indicates that CRAs transfer negative private information to the bond market through credit rating downgrades, which also complements findings in the literature for the validity of credit ratings from an ex post facto perspective. Second, we divide financial misstatements into earnings and non-earnings misstatements and find that the issuers' credit ratings are downgraded to a greater extent in the earnings misstatement year. This finding indicates that CRAs pay more attention to financial information related to earnings, which provides insight into the role of financial information in credit rating assessments. Third, we find that in the institutional context of rating inflation in the Chinese bond market, CRAs adjust credit ratings according to issuers' real financial information in consideration of their own reputation. Our finding enriches the literature on the mechanism of the impact of enterprise financial information quality on credit ratings and identifies the behavioral motivation of CRAs to adjust their credit ratings for the Chinese bond market. Our findings should be of interest to regulators in other emerging economies attempting to suppress rating inflations and improve their bond market efficiency. First, reputation is one of CRAs' most important qualities; thus, they will adopt more stringent rating standards when considering the credibility of their reputational costs. It is necessary for regulators to increase their penalty for improper CRA ratings through the improvement of the relevant institutional systems and increase the reputational costs for CRAs. Second, CRAs should build their competitive advantages by establishing a brand effect with high-quality ratings. Meanwhile, CRAs should expand other revenue channels to get rid of their dependence on revenue from their credit ratings. Third, issuers should strive to improve their corporate fundamentals and value the role that high-quality financial information plays in improving their credit ratings and reducing their corporate bond financing costs.
[1]常莹莹和曾泉,2019,《环境信息透明度与企业信用评级——基于债券评级市场的经验证据》,《金融研究》第5期,第132～151页。 [2]陈关亭、连立帅和朱松,2021,《多重信用评级与债券融资成本——来自中国债券市场的经验证据》,《金融研究》第2期,第94～113页。 [3]陈关亭、朱松和黄小琳,2014,《审计师选择与会计信息质量的替代性研究——基于稳健性原则对信用评级影响视角》,《审计研究》第5期,第77～85页。 [4]何平和金梦,2010,《信用评级在中国债券市场的影响力》,《金融研究》第4期,第15～28页。 [5]寇宗来、千茜倩和陈关亭,2020,《跟随还是对冲:发行人付费评级机构如何应对中债资信的低评级?》,《管理世界》第9期,第26～39页。 [6]李春涛、薛原和惠丽丽,2018,《社保基金持股与企业盈余质量:A股上市公司的证据》,《金融研究》第7期,第124～142页。 [7]李琦、罗炜和谷仕平,2011,《企业信用评级与盈余管理》,《经济研究》第2期,第88～99页。 [8]李善民、杨继彬和钟君煜,2019,《风险投资具有咨询功能吗?——异地风投在异地并购中的功能研究》,《管理世界》第12期,第164～180页。 [9]林晚发、何剑波、周畅和张忠诚,2017,《“投资者付费”模式对 “发行人付费”模式评级的影响:基于中债资信评级的实验证据》,《会计研究》第9期,第62～68页。 [10]林晚发、王雅炯和幸丽霞,2020,《企业定性信息与债券信用评级:基于股权性质的分析》,《中国软科学》第4期,第123～131页。 [11]刘星和陈西婵,2018,《证监会处罚、分析师跟踪与公司银行债务融资——来自信息披露违规的经验证据》,《会计研究》第1期,第60～67页。 [12]马榕和石晓军,2016,《中国债券信用评级结果具有甄别能力吗?——基于盈余管理敏感性的视角》,《经济学(季刊)》第1期,第197～216页。 [13]施丹和姜国华,2013,《会计信息在公司债信用等级迁移中的预测作用研究》,《会计研究》第3期,第43～50页。 [14]宋敏、甘煦和林晚发,2019,《债券信用评级膨胀:原因、影响及对策》,《经济学动态》第3期,第134～147页。 [15]王博森,吕元稹和叶永新,2016,《政府隐性担保风险定价:基于我国债券交易市场的探讨》,《经济研究》第10期,第155～167页。 [16]王小鲁、樊纲和胡李鹏,2019,《中国分省份市场化指数报告(2018)》,社会科学文献出版社。 [17]王雄元和张春强,2013,《声誉机制、信用评级与中期票据融资成本》,《金融研究》第8期,第150～164页。 [18]吴育辉、翟玲玲、张润楠和魏志华,2020,《“投资人付费”vs.“发行人付费”:谁的信用评级质量更高?》,《金融研究》第1期,第130～149页。 [19]杨国超和盘宇章,2019,《信任被定价了吗?——来自债券市场的证据》,《金融研究》第1期,第35～53页。 [20]袁蓉丽、文雯和谢志华,2018,《董事高管责任保险和财务报表重述》,《会计研究》第5期,第21～27页。 [21]Ahn,M.,S. B. Bonsall IV,and A. Van Buskirk. 2019. “Do Managers Withhold Bad News from Credit Rating Agencies?”,Review of Accounting Studies,24(3):972～1021. [22]Altamuro,J.,and A. Beatty. 2010. “How Does Internal Control Regulation Affect Financial Reporting?”, Journal of Accounting and Economics,49(1-2):58～74. [23]Bae, K.,J. Kang,and J. Wang. 2015. “Does Increased Competition Affect Credit Ratings? A Reexamination of the Effect of Fitch's Market Share on Credit Ratings in the Corporate Bond Market”,Journal of Financial and Quantitative Analysis, 50(5),pp. 1011～1035. [24]Becker,B. and T. Milbourn. 2011. “How Did Increased Competition Affect Credit Ratings?”Journal of financial Economics,101(3):493～514. [25]Bolton,P.,X. Freixas,and J. Shapiro. 2012. “The Credit Ratings Game”,Journal of Finance,67(1):85～111. [26]Bonsall IV,S. B.,J. R. Green,and K. A. I. Muller. 2018. “Are Credit Ratings More Rigorous for Widely Covered Firms?”,The Accounting Review,93(6):61～94. [27]Bonsall IV,S. B.,K. Koharki,and M. Neamtiu. 2016. “When Do Differences in Credit Rating Methodologies Matter? Evidence from High Information Uncertainty Borrowers”,The Accounting Review,92(4):53～79. [28]Cheng,M.,and K. R. Subramanyam. 2008. “Analyst Following and Credit Ratings”,Contemporary Accounting Research,25(4):1007～1044. [29]Cornaggia,J., and Cornaggia,K. J. 2013. “Estimating The Costs of Issuer-Paid Credit Ratings”The Review of Financial Studies,26(9):2229～2269. [30]Dechow,P.,W. Ge,and C. Schrand. 2010. “Understanding Earnings Quality: A Review of the Proxies, Their Determinants and Their Consequences”,Journal of Accounting and Economics,50(2-3):344～401. [31]Dimitrov,V.,D. Palia, and L. Tang. 2015. “Impact of The Dodd-Frank Act on Credit Ratings”,Journal of Financial Economics,115(3):505～520. [32]Goldstein, I.,and C. Huang. 2020. “Credit rating inflation and firms' investments”, The Journal of Finance,75(6), 2929～2972. [33]Hunt,J. P. 2009. “Credit Rating Agencies and the Worldwide Credit Crisis: the Limits Of Reputation, the Insufficiency Of Reform, and A Proposal for Improvement”,Colum. Bus. L. Rev,109. [34]Kothari,S. P.,A. J. Leone,and C. E. Wasley. 2005. “Performance Matched Discretionary Accrual Measures”,Journal of Accounting and Economics,39(1):163～197. [35]Kravet,T.,and T. Shevlin. 2010. “Accounting Restatements and Information Risk”,Review of Accounting Studies,15(2):264～294. [36]Mathis,J.,J. Mcandrews,and J. C. Rochet. 2009. “Rating the Raters: Are Reputation Concerns Powerful Enough to Discipline Rating Agencies?”,Journal of Monetary Economics,56(5):657～674. [37]Palmrose,Z. V.,and S. Scholz. 2004. “The Circumstances and Legal Consequences of Non-GAAP Reporting: Evidence from Restatements”,Contemporary Accounting Research,21(1):139～180. [38]Roychowdhury,S and S. Srinivasan. 2019. “The Role of Gatekeepers in Capital Markets”,Journal of Accounting Research,57(2):295～322. [39]Xia,H. 2014. “Can Investor-Paid Credit Rating Agencies Improve the Information Quality of Issuer-Paid Rating Agencies?”,Journal of Financial Economics,111(2):450～468.
