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Research on Corporate Bond Risk Premium and Default Based on Voluntary Dual Ratings Selection

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  • Qianlong Yu
  • Xiaoyi Xiao
  • Yimin Li

Abstract

This study examines the key influencing factors of voluntary dual ratings selection in corporate bond financing and the effect of dual ratings on risk premium and default risk, based on corporate bond data issued from 2016 to 2021. It shows that the worse the bond issuers’ credit qualifications, the more likely they are to seek dual ratings before issuance. Compared to a single credit rating, the risk premium for a bond with dual ratings is lower, and the effect becomes more significant in the low-rated and non-listed company samples. There are dual ratings before bond issuance, and the higher the average credit rating level of the bond, the lower the bond’s default risk. The research findings provide a theoretical basis and empirical evidence for the practice of voluntary dual ratings in China, expand research on the influencing mechanism of bond issuance pricing in the context of voluntary dual ratings selection, and examine the information content of credit ratings from the perspective of their ability to predict bond default.

Suggested Citation

  • Qianlong Yu & Xiaoyi Xiao & Yimin Li, 2023. "Research on Corporate Bond Risk Premium and Default Based on Voluntary Dual Ratings Selection," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 59(6), pages 1690-1706, May.
  • Handle: RePEc:mes:emfitr:v:59:y:2023:i:6:p:1690-1706
    DOI: 10.1080/1540496X.2022.2147786
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    Cited by:

    1. Wang, Hui & Li, Jiarui & Luo, Yixuan, 2024. "Bond yield effects of corporate bond default: Evidence from bond default events of 2014–2022," Finance Research Letters, Elsevier, vol. 60(C).

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