Analysis of Unsolicited Credit Ratings in Japan: New Evidence from Moody's

Lisa M. Fairchild (), Susan M. V. Flaherty () and Yoon S. Shin ()
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Lisa M. Fairchild: Department of Finance, The Sellinger School of Business & Management, Loyola College in Maryland, 4501 N. Charles St., Baltimore, MD 21210, USA
Susan M. V. Flaherty: Department of Finance, Towson University, 8000 York Road, Stephens Hall, Room 316E, Towson, MD 21252, USA
Yoon S. Shin: Department of Finance, The Sellinger School of Business & Management, Loyola College in Maryland, 4501 N. Charles St., Baltimore, MD 21210, USA

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2009, vol. 12, issue 01, 103-123

Abstract: Previous studies show that the unsolicited ratings of S&P and Fitch are lower than the solicited ratings assigned by these two agencies. The unsolicited ratings of S&P and Fitch are based on publicly available information for a firm. However, no previous study has examined the unsolicited ratings of Moody's because Moody's does not disclose whether its ratings are solicited or unsolicited. Using Moody's solicited and unsolicited ratings collected from a survey of Japanese firms, we find that unsolicited credit ratings are still lower than solicited ratings even though firms with unsolicited ratings provide Moody's with some degree of inside information. We also compare the unsolicited ratings of S&P with those of Moody's and find that Moody's ratings are no different than those assigned by S&P although S&P's unsolicited ratings are based on public information. Therefore, we conclude that, regardless of the rating agency, unsolicited ratings are lower than solicited ratings because firms with unsolicited ratings provide incomplete private information to rating agencies.

Keywords: Credit rating agencies; unsolicited ratings; Moody's; JEL Classification: G10; JEL Classification: G20 (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (1)

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DOI: 10.1142/S0219091509001563

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