Jingjing Zhang, Assistant Professor in Accounting, was recently awarded a 2017 FRQSC New Academics Grant for her project "Effet d’entraînement réglementaire transfrontalier : impact des réformes du processus de notation aux États-Unis sur la notation des obligations des sociétés canadiennes. / Cross-Border Regulatory Spillover: The Effect of U.S. Credit Rating Reforms on Canada’s Corporate Bond Ratings".
In this research project, we will examine the regulatory spillover effect from the U.S. to Canada, and identify a new channel through which spillover occurs: credit rating agencies. Specifically, we investigate how the properties of credit ratings for corporate bonds in Canada have changed, following increasing regulatory oversight of credit rating agencies in the U.S. within the last 15 years.
We will conduct empirical analysis to compare rating timeliness and accuracy before and after these regulatory interventions, and exploit unique features of the setting to perform cross-sectional tests that strengthen our causal inferences. This project will contribute to the emerging literature on the regulatory spillover effects by highlighting the important role of international financial intermediaries in the spillover process. It will also add to the credit rating literature by providing systematic evidence on the changes of credit rating quality in Canada.