Do Co-Opted Directors Influence Corporate Risk-Taking and Credit Ratings?

Corporate risk-taking with long-term, short-term and subordinate credit ratings

International Journal of Managerial Finance ◽

10.1108/ijmf-02-2021-0118 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Dror Parnes

Keyword(s):

Risk Taking ◽

Design Methodology ◽

Credit Ratings ◽

Short Term ◽

Content Type ◽

Interaction Terms ◽

Domestic Credit ◽

Lag Variables ◽

Corporate Risk

PurposeThis study empirically examines, from the first quarter of 1981 until the fourth quarter of 2017, the relations across customary domestic issuer credit ratings (long-term, short-term and subordinate) and three popular corporate risk-taking measurements (the variability of operating profitability, net profitability, and research and development expenses).Design/methodology/approachThe author deploys categorical regressions and robustness tests with control variables, interaction terms, fixed effect variables, lag variables and delta variables.FindingsThe author documents that both short-term and subordinate domestic credit ratings are key determinants of the volatility of operating profitability. The author also identifies long-term credit ratings as secondary factors, yet they do affect broader corporate risk-taking behavioral features (along all three measurements). Furthermore, the author finds that the higher (lower) the credit ratings assigned, i.e. the superior (inferior) the credit quality externally judged, the more (less) overall risk firms tend to undertake.Originality/valueIt is the first research to examine both the inclusive influence and the granular effects of credit ratings on corporate risk-taking (CRT) behavior. It is also the only enquiry to inspect the specific relationships along three types of domestic issuer credit ratings: long-term, short-term and subordinate ratings.

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Do co-opted directors influence corporate risk-taking and credit ratings?

The Quarterly Review of Economics and Finance ◽

10.1016/j.qref.2020.07.003 ◽

2020 ◽

Author(s):

Sang Mook Lee ◽

Pornsit Jiraporn ◽

Young Sang Kim ◽

Keun Jae Park

Keyword(s):

Risk Taking ◽

Credit Ratings ◽

Corporate Risk

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Firm Risk-Taking and CEO Visibility

Quarterly Journal of Finance ◽

10.1142/s2010139216500105 ◽

2016 ◽

Vol 06 (03) ◽

pp. 1650010

Author(s):

Yixin Liu ◽

Yilei Zhang ◽

Pornsit Jiraporn

Keyword(s):

Standard Deviation ◽

Risk Taking ◽

Credit Ratings ◽

Media Exposure ◽

Total Risk ◽

Firm Risk ◽

Negative Effect ◽

Corporate Risk ◽

The Relationship ◽

Positive Effect

This paper investigates the relationship between CEO visibility and corporate risk-taking. The empirical results show that more visible CEOs tend to take more risk. A one-standard-deviation shock in the CEOs media exposure results in a 6.53% rise in total risk. We further investigate the channels of risk-taking activities and find that more visible CEOs seek more R&D investments. The positive effect of CEO visibility on firm risk policies is clearly of concern to bondholders. Consistent with this view, we report that CEO visibility has a significant negative effect on firm credit ratings. Our results highlight the importance of CEO visibility on a crucial corporate outcome — the extent of corporate risk-taking.

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