 Split ratings and debt-signaling in bond markets: A noteAshraf Ismail, Seunghack Oh and Nuruzzaman Arsyad Review of Financial Economics, 2015, vol. 24, issue C, 36-41 Abstract: Split ratings occur when national and international credit rating agencies assign different ratings to the same firm. Employing various proxies for asymmetric information and data from advanced and emerging bond markets, we review the evidence that split ratings are caused by asymmetric information between firms and credit rating agencies. We then apply the debt-signaling model to the split ratings problem, by testing for a systematic relationship between the debt-to-equity ratio and the magnitude of split ratings across countries. We finally test for the existence of an optimal debt-signal, which implies that higher debt-to-equity ratios will reduce the ratings split to an optimal minimum, after which accumulating more debt widens the ratings split. Our results suggest that firms in emerging markets can use the debt-signal up to a maximal point, after which it becomes inefficient. Keywords: Credit ratings; Asymmetric information; Debt signal; Bond markets (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:revfin:v:24:y:2015:i:c:p:36-41 DOI: 10.1016/j.rfe.2014.12.003 Access Statistics for this article Review of Financial Economics is currently edited by T. K. Mukherjee and G. Whitney More articles in Review of Financial Economics from Elsevier |
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