Can "Investor-pay" Model Really Improve The Rating Quality Of Rating Agencies?

In recent years,the credit risk of Chinese bond market constantly exposed.In 2014,the bond of Chaori issued in 2011 failed to pay the interest,to become Chinese first default bond which was public offered.As early as 2014,the rating market has been chaos,and the issuer-pay model has been widely questioned.In this context,China Bond Rating Co.,Ltd(CBR)which was the first one to use the investor-pay model was established in Beijing in 2010.On the one hand,with bond defaults into the normalization,the role of credit rating is no longer the "Empty Talk".On the other hand,the establishment of CBR provides the condition for the research of the payment model.Therefore,whether the investor-pay model can really improve the quality of rating agencies is worth studying.The research object of this paper is the A-share listed companies covered by CBR from 2010 to 2015,and the subsample is issues of the Super Short-term Commercial Paper(SCP)which require "double rating" to issue.The paper will concentrate on whether investor-pay model can improve the quality of rating agencies.The study found that:(1)The level of credit ratings made by CBR is lower than that of the issuer-pay model agencies;(2)Credit ratings made by CBR is made with future profitability;(3)The relationship between credit ratings made by CBR and the expected default probability(EDP)of the company is more sensitive than that of issuer-pay model rating agencies;(4)Credit ratings made by CBR can be more explained by the external public information than the issuer-pay model rating agencies;(5)The information obtained by the issuer-pay model rating agencies after into the company,cannot significantly influence the rating made by CBR;(6)Investors recognized credit ratings made by CBR,which can be reflected in the spread of the SCP.The significance of this study is embodied in two aspects:academics and practice.On the aspect of academics,this paper riches the research about the quality of ratings,the effect of payment model,and the relationship between ratings and financing cost.On the aspect of practice,the research on the quality of rating agencies can warn investors to rationally view credit ratings made by different rating agencies,guide issuers improving profitability and solvency to improve the level of credit ratings rather than buying,and also provide recommendations for regulators to formulate policies.