Rui QING

As liberalization of municipal bond market progressed, individual condition negotiation system was officially introduced in September 2006. In order to resolve the asymmetry information problem in financial markets and to reduce issuance costs, local governments began to actively acquire credit ratings. Some municipalities even obtained two credit ratings from separate rating agencies. As for the acquisition of the two ratings, it is possible to consider it is the request from the underwriting financial institution of local bonds or the custom of the local government, but it is also important to clarify whether there are other economic reasons. Thus, this paper quantitatively verified the effects of two credit ratings on the issue costs of local government by using the data of municipal bonds. As a result, the two credit ratings have a significant negative influence on the issue costs. Municipalities are considered reasonable to acquire two credit ratings.