Research On The Impact Of Credit Rating Industry Development On Bond Issuance

Due to the asymmetry of information in bond issuance,investors are often at an information disadvantage.Credit rating agencies can reveal credit risks and therefore have become important intermediaries in the bond market.In recent years,China's credit rating industry has developed rapidly.The establishment of China Bond Rating Co.,LTD in 2010 marked the entry of investor-paid models into the rating industry.In 2018,the inter-bank market opened its qualification certification to foreign rating agencies,marking a significant progress in the international cooperation of the rating industry.Prior to this,China Chengxin International Credit Rating,China Lianhe Credit Rating,and Shanghai Brilliance Credit Rating had international cooperation with the three major international rating agencies.However,the credit rating industry's credibility has been questioned due to the rating inflation,the lack of early warning effects of bond defaults,and the punishment of Dagong Global Credit Rating in 2018.In this context,this article studies the impact of the development of the credit rating industry on bond issuance.On the one hand,this article reflects on the development status of the credit rating industry and analyzes the impact of industry development on issuance ratings and issuance costs;on the other hand,it attempts to make recommendations for the future development of the credit rating industry and bond issuance market.This paper researches in accordance with the framework of theory and literature review-analysis of the current status-research design-empirical testing and analysisresearch conclusions and policy recommendations.This paper selects corporate bonds and corporate bonds issued in China from 2008 to 2019,removes financial debt and other data missing samples,and finally obtains 10,559 valid samples.The credit rating industry factors selected in this paper are two types of payment models and international cooperation.Seven explanatory variables are selected from the perspective of the factor itself,the competition mechanism,and the reputation mechanism.First,this paper uses the Ordered-Logit model,selects corporate credit rating as the dependent variable,analyzes the impact of the rating industry factors on the rating.After studying the overall impact of industry factors,the impacts of the factors through competition and reputation mechanisms are analyzed.Next,in order to study the incremental information brought by the payment model and international cooperation on the issue cost,this paper uses a multiple linear regression model.Select the bond issuance spread as the dependent variable,the rating industry factor itself as the explanatory variable,and the issuer rating and other variables as the control variables.Then,by introducing cross variables of industry factors and issuer ratings,the incremental information transmission mechanism of industry factors is analyzed.In general,the research in this article explores the relationship between the rating industry and the bond issue market.The research conclusions of this paper are summarized as follows:(1)The investor-paid model represented by China Bond Rating has generally pushed up the inflation of issuer rating,but it can bring incremental information to bond issuance costs.In the competition mechanism,the entry of China Bond Ratings has intensified market competition and increased the incentives of issuer-paid institutions to cater to issuers.In the reputation mechanism,although the rating of China Bond Ratings is significantly lower than the issuer-paid Institutions,due to the lack of reputation mechanism,the low rating of China Bond Rating has instead stimulated issuer-paid institutions to upgrade their ratings.However,China Bond Rating's coverage of bond issuers can significantly reduce bond issuance costs,and the impact is transmitted by affecting the ratings of bond issuers.(2)International cooperation has generally constrained the inflation of issuer rating,and it can bring incremental information to bond issuance costs.In the competition mechanism,the share of rating agencies with international cooperation agencies is increased,reducing their competition pressure,and advantages such as technology obtained from international cooperation are brought into play.In the reputation mechanism,regardless of bond defaults or excessive rating upgrades,international cooperation has not been able to play a restrictive role.Instead,it has compensated to push up the rating inflation.Entrusting institutions with international cooperation can significantly reduce the cost of issuing bonds.International cooperation interferes with the transmission of issuer rating information,but affects issuance costs through other mechanisms.(3)In general,the dominant factor in China's credit rating industry is still market competition,and the reputation mechanism has not played a significant restrictive role,and the development of the rating industry has brought incremental information to bond issuance.Finally,based on the theoretical analysis and empirical research results,this article puts forward several suggestions based on China's actual situation.It is recommended that credit rating agencies cultivate technical advantages,pay attention to dynamic adjustment of ratings,and enhance credibility;regulators should promote the further development of investor-paid models and international cooperation,and improve the regulatory mechanism and bond default management mechanism;bond issuers should focus on their own strength and bond products to achieve debt issuance and financing purposes without relying on rating purchases;bond investors should increase their attention to the reputation of credit rating agencies and promote the establishment of a more market-oriented investor payment model rating agency.