| The responsibility of the credit rating industry is to regulate market failure caused by information asymmetry,protecting investors and stabilizing the financial market.China's credit rating industry has problems of late start and weak influence,and it is very urgent to build a functioning credit rating market.In particular,the default risk of China's credit bonds began to be exposed in recent years,putting a stricter requirement on the accuracy and stability of credit ratings.By the literature research,this paper found that reasons of rating credibility can be summarized into two aspects: First,rating agencies could obtain information enhancement beyond public information through professional evaluation and the proprietary information provided by issuers;and then agencies' reputation from accurate ratings works.From the perspective of development history,market conditions and existing problems,this paper carefully reviews the credit bond market and the credit rating industry in China,and combines related economic theories to construct a game model for the information disclosure of rating of credit bond.The disclosure rule is represented by a combination of two variables which measure information enhancement and rating inflation respectively.The paper focuses on a series of market conditions,including competition degree,rating fees,rating costs,etc.,which influence the setting of rating agencies on disclosure rule,and answer whether the rating agencies' strategies meet their credibility requirements.The paper draws the following conclusions: Firstly,whether rating agencies choose the inflated rating is irrelevant to market's competition degree,and improper restrictions on rating fees will result in the rating agency intentionally inflate the rating.Secondly,information enhancement changes reversely when competition degree or marginal cost change,and information enhancement changes positively along the bond's expected quality.Thirdly,a monopolistic rating agency will receive a high rating charge that equals the expected net income of the bond,which in the long run would undermine the market's enthusiasm of other entities for financing and investment.According to the conclusions,this paper puts forward policy recommendations: Firstly,regulators should be cautious about the control on rating fees,avoiding rating inflation caused by excessively low rating fees,as well as unguaranteed income of issuer's or investor's caused by excessively high rating fees.Second,to encourage various measures which could reduce rating cost,and the supervision department should also optimize themselves in performing duties and help the rating agencies to reduce costs.Thirdly,to guide rating agencies to establish a long-term vision and correct concepts,and to cultivate their reputation for high-quality rating services,which in turn regulate the information asymmetry of the rating market.Fourthly,for SMEs with lower credit ratings,it is necessary to advocate and arrange other credit enhancement institutions,which can increase public expectations for the quality of their financing products,as useful supplement to credit ratings. |
