Date of Award

Spring 1999

Document Type


Degree Name

Doctor of Business Administration (DBA)


Economics and Finance

First Advisor

Roger Shelor


The objective of this study is to determine the effect of solicitation and independence on corporate bond ratings. Moody's, S&P, and Fitch IBCA, are full-scale agencies that provide both solicited and unsolicited ratings. These agencies have the potential to provide biased ratings in both directions. Duff and Phelps provides only solicited ratings. It is the only agency that will honor an issuer's request not to be rated. This fully solicited agency also has the potential to provide biased ratings. Little or no prior research exists in this area.

MCM, an independent rating agency until it was merged into Duff and Phelps in 1991, took no fee from the issuers. The agency Egan-Jones can be considered to be a modern-day MCM. However, there is a dearth of literature dealing with the independent agencies. Weiss Ratings is an independent agency that rates primarily insurance firms.

This study tests five hypotheses in order to determine whether solicitation and independence may have an effect in the agencies' ratings. The Friedman Two-Way Analysis of Variance is the primary test utilized. The findings reveal that Duff and Phelps provides the highest ratings followed by Fitch IBCA. The ratings for Moody's and S&P are lower than both Fitch IBCA and Duff and Phelps and are not significantly different from each other. There is no significant difference in terms of timeliness for upgradings. The four full-scale rating agencies upgrade their ratings at the same time.

Moody's and S&P downgrade their ratings at an earlier time than Duff and Phelps and Fitch IBCA. Moody's has a higher upgrade magnitude than Duff and Phelps.

The results for the independence hypotheses reveal that MCM provides lower ratings than both Moody's and S&P. In addition, MCM is more time in terms of upgradings.

The results indicate that the fully solicited agency has incentives to be reluctant to provide the true rating. This result indicates that Duff and Phelps and to a lesser degree Fitch IBCA are hesitant to upset the issuers.