split rating

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Split rating

Two different ratings given to the same security by two important rating agencies.

Split Rating

A situation in which two ratings agencies give a bond two different ratings. Experts disagree as to why ratings agencies may give different ratings, but many point to differences in methodology. They also disagree as to whether the higher or the lower rating affects market prices more. It is important to note, however, that most regulators do not allow banks and some other institutional investors to buy bonds that have not received an investment-grade rating from at least two agencies. Thus, a split rating in which one agency calls a bond investment-grade and another calls it junk can have major implications for issuers and some investors.

split rating

A condition that occurs when the same bond is rated differently by the rating agencies. An example is a bond rated AA by one agency and A by another agency. A split rating may occur because one rating agency places a different emphasis on certain variables or because it views a particular item (such as a recent acquisition by the issuer) differently than the other rating agency.
References in periodicals archive ?
These new criteria have increased issuers' split ratings (when the agencies assign different ratings to the same issuer).
corporate and municipal bonds have letter split ratings (e.
While we believe that both of these studies contribute to the accounting literature, we also believe that the use of only one bond rating source represents a limitation in both studies because the use of only one bond rating source masks the potential influence, if any, of split ratings on the results of these studies.
We also include indicator variables for callable bonds and split ratings.
In other words, it appears that split ratings increase the yield of bonds.
The only country in Latin America with split ratings, Panama has a rating for government bonds that is non-investment grade Ba1, also with a stable outlook.
In examining bond ratings from Moody's and Standard and Poor's, Ederington (1986) does not find any evidence that split ratings result from differences in rating standards (i.
1986, Why Split Ratings Occur, Financial Management, 15: 37-47.
Aa/AA)), or split ratings (different rating categories (e.
Consequently, split ratings impose higher borrowing costs for firms, especially during economic downturns.
We examine the relation between asset opaqueness and split ratings.
5] The empirical evidence in Jewell and Livingston (1998) suggests that cases of split ratings are distinct risk categories.