Research On The Effectiveness Of Bond Rating Based On The Market Structure Of Credit Rating Industry

Relying on the unique rating systems and professional capability in risk management,credit rating agencies have been playing a vital role in providing credit rating for bonds issued by all kinds of players,reducing the information asymmetry in the bond market,decreasing transactions costs and disclosing default risk for a long time.However,these credit rating agencies were met with the public's skepticism since the eruption of the subprime mortgage in 2007.At the same time,the public has found that a range of Chinese bond defaults started from 2015 have fully exposed the obvious high credit rating results.It is controversial that whether the credit rating released by credit rating agencies can reveal bond risk effectively.Against this back ground,this paper makes deep comparison of the credit rating industry between China and America in the course of development,industry circumstance and market structure and explain why our country is lagged behind the countries with developed financial markets.After that,this paper seeks a new perspective by combining the reputation theories with the industry theory to combine the credit rating market's structure with reputation mechanisms and makes deep discussion of the different timeliness in different market structures.Besides,takes the enterprise bonds issued in our country during 2008-2016 as example,this paper takes credit rating market's structure as the instrumental variables and researches the appreciable effect imposed on the cost of bond issue by credit rating to judge the credit rating's influence on bond market and the timeliness in disclosing bond's credit risk and its function in reducing information asymmetry of financial market.According to the above analysis,the results shows: first,effective credit rating market structure should be oligopoly with high monopoly degree;second,China's current credit rating market structure makes it difficult to use the timeliness of bond rating well.Lastly,this paper renders advice in reforming credit rating industry.