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Article: Examining split bond ratings: effect of rating scale.(Author abstract)
- Article from:
- Quarterly Journal of Business and Economics
- Article date:
- March 22, 2007
- Author:
CopyrightCOPYRIGHT 2007 University of Nebraska-Lincoln. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Introduction
Investors use bond ratings to measure the riskiness of bonds, and they accordingly make their investments in a firm's securities. Firms are influenced by bond ratings, as the ratings affect the firm's access to capital and its cost of capital. Two major agencies, Moody's Investors Service (Moody's) and Standard & Poor's Ratings Group (S&P), dominate the market in rating publicly traded bonds. The two rating agencies disagree substantially on the ratings for a particular issue or company. (1) Split ratings, especially at the mid range level, have major financial implications. Regulators restrict many investment firms from investing in securities that ...