Foreign ownership in Chinese credit ratings industry: information revelation or certification?

Xiaolu Hu, Jing Shi, Lafang Wang, Jing Yu

Research output: Contribution to journalArticlepeer-review

12 Citations (Scopus)


We investigate the informational roles of foreign ownership in local credit rating agencies (CRAs) in the Chinese onshore debt market, which was the world's largest emerging debt market from 2008 to 2017. We find a robust negative relationship between the bond offering yield and foreign ownership in local CRAs, which suggests that these ratings certify the credit quality of debt issuers and thus enhance the market values of new debt issues. The information content of these ratings, however, is in contrast with the information provision role of foreign-owned CRAs (global CRAs). We find that these ratings provide no or weak better predictive power of issuers’ future credit performances than domestic CRAs. In addition, we find that stock and bond market reactions at the announcements of rating revisions made by global CRAs are not significantly different from those made by their domestic counterparts. We attribute the seemingly contradictory results to the preference for foreign brands in emerging markets and/or the improved bond liquidity associated with global CRA ratings.
Original languageEnglish
Article number105891
Number of pages19
JournalJournal of Banking and Finance
Early online date10 Jul 2020
Publication statusPublished - 1 Sept 2020


  • Chinese debt market
  • Credit rating
  • Foreign ownership


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