THE IMPACT OF SPLIT BOND RATINGS ON ACCOUNTING RESEARCH RESULTS: SOME ADDITIONAL EVIDENCE AND SOME PRELIMINARY INSIGHTS

Accounting studies that employ bond ratings (as either independent or dependent variable measures) do not address the issue of split bond ratings because such studies do not use more than one bond rating source. Before commenting on the possible influence of split bond ratings on accounting research results, additional evidence is provided to support the majority view that Moody's bond ratings are generally more conservative than S&P bond ratings. The empirical results of the study, which are consistent with the majority of the previous bond rating research results, indicate that Moody's bond ratings are generally more conservative than S&P bond ratings. This finding leads us to suggest that accounting researchers employ multiple bond rating sources when conducting research on bond ratings to minimize the potential for bond rating agency bias. Additionally, it is suggested that accounting researchers avoid mixing data sources (e.g., Compustat accounting data should be employed in studies where S&P bond ratings are employed). Extensions of this research could focus on quantifying the extent of the bias, if any, associated with the use of only one bond rating source. Additionally, future research could focus on quantifying the extent of the bias, if any, associated with mixing data sources. Future research could also focus on quantifying the extent of the bias, if any, associated with the use of standardized versus as reported accounting data.