Corporate bond ratings, underwriters’ reputation and cost of bonds

Chao Chen, Yang Zhao and Yu Zhao

Asia-Pacific Journal of Accounting & Economics, 2019, vol. 26, issue 1-2, 1-16

Abstract: This paper studies the impact of underwriters’ reputation on corporate bond ratings and issuers’ cost of bonds measured by their yield spread in China. By analyzing all corporate bond issues from the first issue in August 2007 to October 2014, this study finds that after controlling for the endogenous issue and other factors, rating agencies are likely to take the reputation of underwriters into consideration when assigning credit ratings. Furthermore, the reputation of underwriters can decrease bond financing costs through the channel of credit ratings. Specifically, the higher the reputation of underwriters is, the higher the credit ratings and the lower the yield spread of bonds will be. This study provides new evidence for the effect of underwriters’ reputation in the process of bond initial issuing in China.

Date: 2019
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DOI: 10.1080/16081625.2019.1522570

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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