 Does the market differentiate between investor-paid and issuer-paid ratings in the pricing of asset-backed securities?Xiaojian Liu, Beng Chong and Xiaozhi Feng Pacific-Basin Finance Journal, 2023, vol. 79, issue C Abstract: We examine the relative effects of investor-paid and issuer-paid ratings on the at-issuance pricing of China's asset-backed securities (ABS). In theory, issuer-paid ratings are more prone to rating inflation but are more informative than investor-paid ratings. Empirically, we find that investor-paid ratings are significantly more conservative than issuer-paid ratings, on average. Also, the market does differentiate between issuer-and investor-paid ratings in ABS pricing. For split rated issues, the yield spread is higher if the inferior rating is from an investor-paid rating agency. Furthermore, the relative credibility of investor-paid ratings over issuer-paid ratings is asymmetric and largely applicable to inferior ratings. Keywords: Issuer-paid rating; Investor-paid rating; Conflicts of interest; Rating inflation; Rating shopping; Rating catering; Rating Informativeness; Rating credibility (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:pacfin:v:79:y:2023:i:c:s0927538x23000938 DOI: 10.1016/j.pacfin.2023.102027 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
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