An Analysis of Credit Rating Agency’s Rating Adjustments Effects on Rating Split

This study investigates how credit rating agency"s qualitative rating adjustments factors(Rating Deviation) in the credit rating process for corporate bond affect the discrepancy in opinions among credit rating agencies(Rating Split). In an empirical analysis using Korean listed companies from 1998 to 2022, our findings can be summarized as follows. First, the absolute value of Rating Deviation exhibits a positive association with the likelihood of Rating Split among multiple credit rating agencies. This suggests that a greater incorporation of qualitative rating adjustments factors in credit rating assessments leads to a higher likelihood of rating disparities among credit rating agencies. Second, the raw value of Rating Deviation is negatively associated with the likelihood of Rating Split, suggesting that the probability of Rating Split increases when a credit rating agency take a conservative approach in their qualitative assessment. This study extends related research by exploring the causes of rating disparities among multiple agencies through the rating mechanism per se, rather than the perspective of information asymmetry.