Utilizing an influential event, the 2005 Lehman index rule change, we examined the role of multiple bond ratings in corporate hedging. We find that U.S. firms exhibit a sharp increase in their demand for a third Fitch rating after the Lehman event, with the pattern particularly significant for...

This paper examines the role of bond ratings and the effects of rating-based regulations in the corporate bond market. Exploiting an unanticipated mechanical change in how the benchmark Lehman bond indices are constructed in 2005, we show that rating-induced market segmentation of the bond...

This paper documents a new channel for rating-based bond market segmentation which, in contrast to prior research, is based on non-regulatory asset management practices. A 2005 Lehman Brothers index redefinition provides a quasi-natural experiment in which a number of previously high-yield...