Abstract: The market for the credit ratings of Chinese firms featured China-specific characteristics: little overlap of the coverage of domestic and global rating agencies. Domestic agencies rate firms that are jointly rated higher by 6-7 notches on average; the ratings scales of the domestic and global agencies appear to be different despite the similar symbols. It may be due to the effect that a firm with same credit risk has different relative orders when they are put in different rating systems. After the global ratings are adjusted, by a method provided by us, so as to align global and domestic scales, we test whether the determinants of ratings are similar across global and domestic agencies. We find that larger asset size and higher leverage tend to result in firms receiving higher domestic ratings than adjusted global ratings, but higher profitability or state-ownership are more likely to result in firms receiving higher adjusted global ratings than domestic ratings. This is because asset size is weighed more heavily as a positive factor by domestic agencies, and leverage is weighed more heavily as a negative factor by global agencies. Profitability and state-ownership are weighed more positively by global rating agencies. The impact of the variables is generally stable across a variety of robustness checks. The results suggest a number of policy implications.
Full report ：WP No.20175 Credit Ratings of Chinese Firms by Domestic and Foreign Rating Agencies-Differences and Determinants.pdf
