Is solicitation status related to rating conservatism and rating quality?

Abstract This paper discusses the association between rating solicitation status and rating quality. Our model shows that if firms with a declining trend of performance are less likely to solicit ratings from credit rating agencies, these firms are more conservatively rated, as their self-selection behaviour is seen as a signal of high credit risk. Our empirical results support the predictions of the model proposed in this study and show that: first, when controlling for fundamental factors, unsolicited ratings are lower than solicited ones, and; second, the rating qualities of both types of ratings are not significantly different from each other.