Research On Conflict Of Interests Of Credit Rating Under Issuer Payment Mode

The outbreak of the U.S.subprime mortgage crisis in 2008 gradually revealed the conflict of interest of credit rating agencies.In 2014,the "Rigid Repayment" of China’s bond market has been broken,and bond default events occurred frequently,including a large number of AAA rated default bonds.Before bond default,rating agencies generally did not downgrade their credit rating in time,and even the issuer had defaulted,the event that the rating agencies have not downgraded their ratings has questioned the professional ability and professional ethics of credit rating agencies by market regulators and investors.The domestic rating market is mainly based on the issuer payment mode,and the issuer entrusts rating agencies to carry out rating,while the investor payment mode accounts for a relatively small proportion.The financial industry and academia generally believe that the use of "issuer payment" for credit rating and the non-independence of the business model of rating agencies are the main reasons for the conflict of interest and the false high rating.This paper discusses and explores the conflict of interest in credit rating under the issuer payment mode.The paper compares the relevant credit rating results and rating downgrades under the issuer payment mode with the data under the investor payment mode,and analyzes the conflict of interest in the default bond data and the default cases of brilliance group and Founder Group,The data research results show that the rating results of the issuer paid rating agencies are more optimistic than those of the investor paid rating agencies.In terms of the prediction of bond default,the issuer paid rating agencies cannot timely warn the market of bond default by downgrade,and the rating adjustment time is on average later than that of the investor paid rating agencies,The results of the case study show that there is an obvious conflict of interest between the issuer’s paid rating agency and the issuer.