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Does the Nationally Recognized Statistical Rating Organization certification matter for Japanese credit rating agencies?

Soku Byoun, Seung Hun Han and Yoon S. Shin

Journal of Financial Markets, 2021, vol. 56, issue C

Abstract: The SEC’s NRSRO designation for Japanese credit rating agencies is suitable for examining certification and monitoring effects, as Japanese domestic bond markets are not subject to SEC regulations. We find that the certification increased the market share of new NRSROs compared to that of incumbent NRSROs. Moreover, bond issues rated by newly certified NRSROs obtained lower yields and their ratings became relatively more informative for predicting the yield spread after the NRSRO designation. Our findings suggest that the NRSRO designation enhances the reputation of newly certified NRSROs and the value of their ratings information.

Keywords: Credit rating agency; SEC regulation; Certification; Competition; Japanese capital markets (search for similar items in EconPapers)
JEL-codes: G10 G14 G15 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.finmar.2020.100585

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Journal of Financial Markets is currently edited by B. Lehmann, D. Seppi and A. Subrahmanyam

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