Submitted in partial fulfillment of the requirements For the degree of DOCTOR OF PHILOSOPHY INDUSTRIAL ADMINISTRATION ( ACCOUNTING ) Titled “ INFORMATION AND THE BOND MARKET ”

This dissertation studies the issues on information and the bond market. The first essay examines the incentives of certified credit rating agencies to issue credit watches. The second essay studies how quality of private information of investors affects bond yield spreads. The third essay studies whether more accrual-based income smoothing is related with better or worse bond ratings. Essay 1: Asymmetric Credit Watches before Downgrades and Upgrades: Evidence on Conservatism of Certified Credit Rating Agencies Certified credit rating agencies issue credit watches to warn about changes in firms’ creditworthiness and possible future rating changes. More rating downgrades are preceded by credit watches than rating upgrades, consistent with the rating agencies being conservative, that is, responding more quickly to bad news than to good news. Downgrades are more likely to be preceded by credit watches than upgrades when (1) the ratings are of investment grade, (2) there are rating triggers, and (3) the issuer’s securities-related litigation risk is high. These results suggest that rating agencies’ conservatism, like accounting conservatism, is likely motivated by contracting and litigation. Essay 2: Quality of Private Information and Bond Yield Spreads Private information of investors could play a different role in the over-the-counter (OTC) market for corporate bonds than in the equity market. In particular, private information could reduce dealer market power and assessed default probability while