Role and Relevance of Credit Rating - A Study with Special Reference to Retail Equity Investor's Perception in India

Credit rating agencies play an important role in providing one source of information that aids exactitude and market competence thereby tumbling the imbalance of information that often exists among the stock market investors. Credit rating provides analytical assistance to the potential investors on the extent of risk involved in the appropriate repayment of principal and interest. Rating gives advanced information about the rated product at low cost to the investor. Thus, the investor can effortlessly identify the risk involved and obtain predictable benefit of the instrument by glancing at the symbols. This study endeavors to act show as to how the retail equity investors could enhance their participation in the Indian Capital market by relying on the information dished out by the credit rating agencies. The methodology of the study is based on primary data collected through well framed and structured questionnaire to elicit the perception of retail investors on the usefulness of credit rating agencies. Factor analysis by principal component method has been applied to reduce the number of awareness of rating among the retail equity investor related variables and usage of ratings related variables into four meaningful factors respectively. Multiple regression analysis has been employed to establish the influence of Awareness of the ratings among the retail equity investor with the usage of rating by the retail equity investor. Results reveal that awareness about the credit rating by providing appropriate information to the retail equity investors and integrity of Credit Rating play vital role in creating maximum Usage of rating by offering Credit Protection to the equity investor.