Research On The Effect Of Northbound Trading Progrme On Credit Rating

Bond credit rating is one of the main ways for bond investors to obtain information on corporate credit risk.However,the credit rating standards and legal system in China’s bond market are not perfect,and the investors’ rights and awareness are weak.The phenomenon of rating convergence and inflation occurs frequently.On July 3,2017,the Bond Northbound policy was officially launched.By introducing foreign investors with stronger awareness of legal rights protection and higher professional accomplishment,the rating behavior of credit rating agencies will be restrained to a certain extent.Firstly,this paper combs the relevant research on credit rating by scholars at home and abroad.According to the information asymmetry theory and principal-agent theory,combining with the difference in credit rating of bonds included in and not included in the northbound list before and after the opening of northbound credit rating agencies,the research puts forward the hypothesis that credit rating agencies act more cautiously.Secondly,a difference-in-difference model is established to make an empirical study based on 12,365 sets of samples in five half-year periods from the first half of 2016 to the first half of 2018.Finally,some thoughts and suggestions on the supervision of credit rating industry are put forward.This paper has certain reference significance and reference value for the information quality provided by credit rating in mainland capital market,and for improving and standardizing the industry supervision of credit rating agencies.Empirical research results show that the opening of Bond Northbound leads credit rating agencies to downgrade their products.When faced with higher risk litigation and stronger investor supervision,credit rating agencies will behave more cautiously.Among them,the credit rating agencies with low reputation and domestic capital have a greater response to Bond Northbound;the bonds with high cash flow and high attention are more affected by Bond Northbound.This paper suggests that while further deepening the introduction of foreign investors,we should improve the legal norms of rating industry,strengthen investor education and cultivate public supervision.