Analysis Of The Causes Of Inflated Credit Rating In China

Credit rating as a important way to reduce the bond market information asymmetry problem,this should be for investors to reveal the credit risk of issuers in the bond issuer default "warning" effect,but in 2014 super November,"debt" default,credit default events occur frequently,often appear even the body of the AAA ratings to default,Raising questions about the quality of credit ratings.Finding the main reasons for the low quality of our credit rating has become an urgent problem.This article first combs the domestic and foreign literature on the factors influencing the credit rating quality,and finds out that most domestic scholars attribute the main reason of China’s credit rating inflation to the "issuer pay" mode to induce the bond issuers to choose and buy to the rating agency.On this basis,combined with the actual situation of our country’s "compulsory rating" and the background of "strong competition",this article concludes that there is matching behavior in the rating market through theoretical analysis.The "compulsory rating" makes the issuers of low quality bonds choose low reputation rating agencies to get a high rating.As a result,the overall rating distribution in the market is skewed to the left,resulting in the problem of inflated ratings.Secondly,this article uses the actual data of our bond market to verify the cause of the fictitious high of our credit rating,which provides empirical evidence for the above theoretical analysis.This paper takes corporate bonds issued from January 1,2014 to December 31,2021 and corporate bonds issued from January 1,2015 to December 31,2021 as the research objects.The t-test and K-S test are conducted on the rating results of different rating agencies in China.The results show that the rating distribution among most rating agencies is significantly inconsistent,which verifies the heterogeneity among rating agencies in China.The t test is conducted on the credit spreads of different types of bonds,and the results show that the credit spreads of different types of enterprise sizes are significantly inconsistent,which verifies the heterogeneity among bond issuers.Subsequently,this paper innovatively uses serial free multi-classification Logistics regression model to test the matching relationship between heterogeneous bond issuers and heterogeneous rating agencies.Through the model results show that the bond market in our country,the specific types of businesses will be looking for a specific type of match,a rating agency,and can be seen from the overall of the relatively small size enterprises tend to choose under the credit evaluation in the new century investment service co.,LTD.And Shanghai peng yuan credit rating co.,LTD.,the two agencies.Finally,according to the indicators of operating income and total assets,this paper respectively observes the selection of rating agencies by the top and bottom bond issuers,and observes their ratings.The empirical results show that,among the issuers of corporate bonds,the smaller bond issuers can obtain higher ratings than the same type of bond issuers by selecting China Securities Pengyuan Credit Rating Co.,Ltd.and United Credit Rating Co.,Ltd.for rating.Among the issuers of corporate bonds,smaller-scale bond issuers can obtain higher ratings than those of the same type of bond issuers by selecting China Securities Pengyuan Credit Rating Co.,LTD and Shanghai New Century Credit Rating Investment Service Co.,LTD.,so the ratings of these issuers are generally higher.Among the seven rating agencies,the rating results of China Chengxin International Credit Rating Co.,Ltd.are relatively strict,and larger enterprises are more likely to choose China Chengxin International Credit Rating Co.,Ltd.but because of their high quality,they also get higher ratings.From a positive perspective,this paper explains the left-leaning of the overall rating distribution of China’s credit rating,and then the reasons for rating inflation.Finally,based on the existing policy system and industry development,the thesis puts forward relevant policy suggestions on how to improve our rating quality based on the theoretical analysis and empirical analysis.