During global financial crisis, CRA(Credit Rating Agency)s' risk underestimation and late rating adjustment to distressed-debt have been criticized. Particularly, the possibility of rating inflation or rating shopping has been raised. Also such possi...
During global financial crisis, CRA(Credit Rating Agency)s' risk underestimation and late rating adjustment to distressed-debt have been criticized. Particularly, the possibility of rating inflation or rating shopping has been raised. Also such possibility of rating inflation was often doubted in Korean Industry and thus our study empirically tests the existence of rating inflation in domestic corporate bond market and finds that the rating inflation exists to some extent. finally, based on the above finding, we suggest that Korea financial supervising authority needs to reform current issuer pay model to resolve such suspicion on rating inflation.