Female Executives in Rating Agencies and Bond Rating Quality

Abstract

This study investigates the influence of female executives in credit rating agencies on bond rating quality, using a sample of medium-term notes, corporate bonds, and enterprise bonds issued between 2010 and 2023. The findings reveal that a higher proportion of female executives in rating agencies is associated with improved bond rating quality. Relative to their male counterparts, female executives exhibit lower risk preferences, produce more objective and accurate ratings, and demonstrate greater attention to corporate sustainability and social responsibility. These tendencies encourage rating agencies to enhance the quality of information disclosure, thereby contributing to higher bond rating quality. Heterogeneity analysis indicates that this positive effect is more pronounced among bond-issuing firms that are non-state-owned, have lower credit ratings, or operate in industries with weaker competitive positions. Further analysis shows that the presence of female executives in rating agencies is associated with lower expected default probabilities for bonds. This study contributes to the existing literature by extending research on female executives to the rating agency context, introducing gender heterogeneity as a novel perspective for examining bond rating quality, and providing practical implications for regulators seeking to curb rating inflation and improve transparency, in alignment with China's 2021 credit rating reform.