Split bond ratings: Evidence from Japanese credit rating agencies

This study examines why split bond ratings occur between credit rating agencies with different reputations in Japan. Using a sample of Japanese corporate bonds newly issued during the 2006-2021 period, I find that the ratings assigned by a less reputable Japanese rating agency (JCR) are significantly higher than those by a more reputable Japanese rating agency (R&I) for the same bonds because JCR is likely to rate the creditworthiness of bond issuers more highly than R&I. The disagreement between JCR and R&I over the creditworthiness of issuers causes split bond ratings. Moreover, bonds with multiple split ratings have higher yield spreads.