Title: Bond rating and bond market of Indian corporate – issues and recommendations

Authors: Manisha Kumari; V. Mary Jessica

Addresses: Paari School of Business, SRM University AP, India ' School of Management Studies, University of Hyderabad, India

Abstract: Financing plays a vital role in every organisation. Over the past decade, all countries wanted to strengthen the bond market. The value of the firm is directly associated with the proportion of debt present in the capital. The value can be increased and overall cost of capital can be decreased by increasing capital financing through bonds. Yet, Indian corporate bonds have a negligible share in the global bond market. This paper explores the bond market and rating of the bonds provided by different credit rating agencies (CRAs). This will also explain the policy and regulations made by regulators for bond market and bond rating. The result shows that CRAs need to strengthen the rating procedure to reduce the PDs and survival in the market. The PDs must be predicated by CRA for each bond and need to be disclosed publicly. Based on reports, bond data, default history and literature, this paper gives recommendations to strengthen the corporate bond market. Due to the constant default of rated bonds, the CRAs are criticised for their inability to predict PD. In addition, the change in rating has an impact on stock prices and there is need to give proper evidence with the factors.

Keywords: bond market; bond rating; corporate bond; credit risk; probability of default; stock price; India.

DOI: 10.1504/IJBEX.2023.128660

International Journal of Business Excellence, 2023 Vol.29 No.2, pp.204 - 221

Received: 28 Mar 2020
Accepted: 17 Jun 2020
Published online: 01 Feb 2023 *

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