An empirical examination of the informational content of credit ratings in China
Document Type
Journal article
Source Publication
Journal of Business Research
Publication Date
7-1-2008
Volume
61
Issue
7
First Page
790
Last Page
797
Publisher
Elsevier Inc.
Keywords
Credit ratings, Informational content, China
Abstract
We examine the certification effect of initial rating announcements and the signaling effect of rating downgrade announcements in China using a pooled time-series cross-sectional issuer rating data of 170 companies listed on the Shanghai and Shenzhen Stock Exchanges from 2002 to July 2006. The empirical evidence supports our hypothesis of an asymmetric certification effect. Consistent with the literature, we also find some negative signaling effects in our rating downgrade sub-sample. Overall, although there are some qualitative arguments that credit ratings in China do not have information content, our empirical findings suggest otherwise. When a normally positively biased rating agency gives a low rating, it is valuable news to market participants.
DOI
10.1016/j.jbusres.2007.08.001
Print ISSN
01482963
E-ISSN
18737978
Publisher Statement
Copyright © 2007 Elsevier Inc.
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Poon, W. P. H., & Chan, K. C. (2008). An empirical examination of the informational content of credit ratings in China. Journal of Business Research, 61(7), 790-797. doi: 10.1016/j.jbusres.2007.08.001