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An empirical examination of the informational content of credit ratings in China
Journal of Business Research
  • Winnie P.H. POON, Lingnan University, Hong Kong
  • Kam C. CHAN, Western Kentucky University, United States
Document Type
Journal article
Publication Date
  • Credit ratings,
  • Informational content,
  • China
We examine the certification effect of initial rating announcements and the signaling effect of rating downgrade announcements in China using a pooled time-series cross-sectional issuer rating data of 170 companies listed on the Shanghai and Shenzhen Stock Exchanges from 2002 to July 2006. The empirical evidence supports our hypothesis of an asymmetric certification effect. Consistent with the literature, we also find some negative signaling effects in our rating downgrade sub-sample. Overall, although there are some qualitative arguments that credit ratings in China do not have information content, our empirical findings suggest otherwise. When a normally positively biased rating agency gives a low rating, it is valuable news to market participants.
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Copyright © 2007 Elsevier Inc.

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Citation Information
Poon, W. P. H., & Chan, K. C. (2008). An empirical examination of the informational content of credit ratings in China. Journal of Business Research, 61(7), 790-797. doi: 10.1016/j.jbusres.2007.08.001