Title

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

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.

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Full-text Version

Publisher’s Version

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