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.

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These new criteria have increased issuers' split ratings (when the agencies assign different ratings to the same issuer).

Municipal market forecasts and trends

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.

The impact of split bond ratings on accounting research results: some additional evidence and some preliminary insights

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 notching rule for subordinated debt and the information content of debt rating

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.

RATING SUPPORTED BY SERVICE SECTOR

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.

PROPERTY-LIABILITY INSURER FINANCIAL STRENGTH RATINGS: DIFFERENCES ACROSS RATING AGENCIES

TWI) does not result in split ratings for the two companies because it does not change the existing economic and operational ties, Fitch says.

TIME WARNER DECONSOLIDATION DOES NOT SPLIT RATINGS, FITCH SAYS -- FITCH FINANCIAL WIRE --

Consequently, split ratings impose higher borrowing costs for firms, especially during economic downturns.

Split bond ratings and information opacity premiums

We examine the relation between asset opaqueness and split ratings.

Asset opaqueness and split bond ratings

5] The empirical evidence in Jewell and Livingston (1998) suggests that cases of split ratings are distinct risk categories.