TITLE:
Are Bond Defaults with the Connivance of Credit Rating: An Analysis of China’s Bond Market
AUTHORS:
Xudong Zhuang, Yu Wu
KEYWORDS:
Credit Rating, Bond Default, Conflict of Interest, Financial Supervision
JOURNAL NAME:
Open Journal of Business and Management,
Vol.9 No.5,
August
30,
2021
ABSTRACT: We find that there is a same tendency between credit ratings and bond
defaults by analyzing the status quo of defaults in Chinese market and credit
ratings from 2015 to 2020. Caused by the interest conflicts of business models,
ancillary business, public information ratings and horizontal competition, the
quality of credit rating is badly impacted, thus resulting in the defaults.
Therefore, we explain the reasons for such a tendency from interest conflict
perspectives. We also offer some proposals to avoid default problems and
improve the ratings provided by credit rating agencies, so as to promote the
healthy development of bond market and preventing the systemic risks that bond
market brings. Consequently, our study systematically concludes the interest
conflict problems that lead to rating inflation and enriches related
literature.