Does Split Rating Affect Corporate Bond Yields? Evidence from North America and Europe

Kolegova Irina and Paientko Tetiana ()
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Kolegova Irina: HTW Berlin -University of Applied Sciences, Treskowallee 8, 10318 Berlin, Germany
Paientko Tetiana: HTW Berlin -University of Applied Sciences, Treskowallee 8, 10318 Berlin, Germany

Central European Economic Journal, 2025, vol. 12, issue 59, 17-33

Abstract: The paper aims to determine the effect of split ratings on corporate bond yields. A Two-Sample t-Test was conducted for each risk category of bonds to assess the impact of split ratings. Using a sample of corporate bonds issued between January 2000 and May 2023, the study finds evidence that split-rated bonds exhibit higher yields. This suggests that investors demand greater compensation for the risk associated with split ratings, which stems from the informational opaqueness and uncertainty surrounding these instruments. The research also reveals that the magnitude of the difference between split ratings affects bond yields, with larger gaps leading to higher yields. The findings have significant implications for investors and issuers, emphasising the need to carefully evaluate split-rated bonds and consistent credit ratings. By enhancing our understanding of the relationship between split ratings and bond yields, this research promotes transparency and informed decision-making in the corporate bond market.

Keywords: split rating; bond yields; credit rating adjustments; solicit multiple ratings; credit rating agency (CRA) (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:ceuecj:v:12:y:2025:i:59:p:17-33:n:1001

DOI: 10.2478/ceej-2025-0002

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