Does Having a Credit Rating Leave less Money on the Table When Raising Capital? A Study of Credit Ratings and Seasoned Equity Offerings in China"

Pui Han POON, Kam C. CHAN, Michael FIRTH

Research output: Other Conference ContributionsPresentation


We examine the impact of unsolicited credit ratings on seasoned equity offering (SEO) under pricing in China using issuer credit rating data of listed companies on the Shanghai and Shenzhen stock exchanges for the period 2002 to 2009. Our findings suggest that, after controlling for other factors, a SEO firm in china with a credit rating is able to reduce its SEO under pricing, on average, by 13.26% to 15.80%. In addition, the under pricing of an SEO firm that receives a speculative-grade credit rating is not significantly different from an SEO firm with an investment-grade rating. Thus, SEO firms appear to benefit from receiving an unsolicited rating. In general, credit ratings reduce information asymmetry and hence leave less money on the table when raising capital. This may lead firms to actively solicit credit ratings
in the future, especially those who plan to access the capital markets.
Original languageEnglish
Publication statusPublished - Jun 2012
EventThe 19th Annual Conference of the Multinational Finance Society - Poland, Krakow, Poland
Duration: 24 Jun 201227 Jun 2012


ConferenceThe 19th Annual Conference of the Multinational Finance Society
OtherMultinational Finance Society
Internet address

Bibliographical note

June 24 to 27, 2012

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