Do bond issuers shop for a better credit rating?

By utilizing a large sample of US bond issuers with ratings from Moody's, S&P, and Fitch, this paper analyses whether observed differences in average rating levels between the third agency Fitch and the mandatory agencies Moody's and S&P are due to issuers seeking only an additional rating if it is expected to give a more favorable picture of credit quality. In contrast to previous research, we also ask why some issuers possibly do expect to obtain an upwardly biased credit risk assessment from Fitch. The analysis reveals strong evidence of rating shopping behavior. In addition, issuers having an added incentive to press Fitch for a better rating are more likely to solicit a third rating. Finally, by comparing Fitch's rating class default probabilities estimated for issuers with and without an observed Fitch rating, we nd that the default risks associated with a particular rating class are signi cantly increased for the rst group.