scholarly journals Does CEO tenure influence corporate bond rating properties?

2015 ◽  
Author(s):  
◽  
Xia Zhang
Keyword(s):  
Information Sharing ◽  
Private Information ◽  
Credit Ratings ◽  
Public Information ◽  
Strategic Communication ◽  
Corporate Bond ◽  
Bond Rating ◽  
Rating Agencies ◽  
Ceo Tenure ◽  
The Impact

This study examines whether and how corporate bond rating quality varies with CEO tenure. Due to the expansive roles of credit ratings in capital market, managers have incentives to maintain or improve their ratings. Accumulated firm experience makes longer-tenured CEOs better at strategic communication with rating agencies and thereby more able to achieve the desired rating outcomes, leading to lower rating quality. Consistent with this prediction, I find that ratings are less accurate, less timely, and more volatile for issuers with longer-tenured CEOs. All these results hold after controlling for the impact of CEO tenure through public information sharing, suggesting that longer-tenured CEOs manage credit ratings through private information sharing with rating agencies. Moreover, investors do not understand such rating management by longer-tenured CEOs.

scholarly journals Corporate Yields: Effect of Credit Ratings and Sovereign Yields

2020 ◽  
Vol 110 ◽  
pp. 499-503
Author(s):  
Julia Bevilaqua ◽  
Galina Hale ◽  
Eric Tallman
Keyword(s):  
Credit Ratings ◽  
Corporate Bonds ◽  
Public Information ◽  
Corporate Bond ◽  
Bond Yields ◽  
Upward Trend ◽  
Bond Ratings ◽  
Rating Agencies ◽  
Advanced Economies ◽  
Over Time

We empirically evaluate the importance of two sources of public information affecting pricing of global corporate bonds: bond ratings provided by rating agencies and sovereign yields of the issuer's country. We find that both in the cross section of firms and over time more variation in corporate bond yields is explained by sovereign yields than by corporate bond ratings. When sovereign yields are high, their importance in pricing corporate bonds declines. In these states, for advanced economies' borrowers, the importance of corporate ratings increases. There is a small upward trend in the importance of corporate ratings over time.

Analysis of Unsolicited Credit Ratings in Japan: New Evidence from Moody's

2009 ◽  
Vol 12 (01) ◽  
pp. 103-123 ◽  
Author(s):  
Lisa M. Fairchild ◽  
Susan M. V. Flaherty ◽  
Yoon S. Shin
Keyword(s):  
Private Information ◽  
Credit Ratings ◽  
Public Information ◽  
Inside Information ◽  
Rating Agencies ◽  
Rating Agency ◽  
Japanese Firms ◽  
Unsolicited Ratings ◽  
Available Information ◽  
New Evidence

Previous studies show that the unsolicited ratings of S&P and Fitch are lower than the solicited ratings assigned by these two agencies. The unsolicited ratings of S&P and Fitch are based on publicly available information for a firm. However, no previous study has examined the unsolicited ratings of Moody's because Moody's does not disclose whether its ratings are solicited or unsolicited. Using Moody's solicited and unsolicited ratings collected from a survey of Japanese firms, we find that unsolicited credit ratings are still lower than solicited ratings even though firms with unsolicited ratings provide Moody's with some degree of inside information. We also compare the unsolicited ratings of S&P with those of Moody's and find that Moody's ratings are no different than those assigned by S&P although S&P's unsolicited ratings are based on public information. Therefore, we conclude that, regardless of the rating agency, unsolicited ratings are lower than solicited ratings because firms with unsolicited ratings provide incomplete private information to rating agencies.

scholarly journals Does Increased Competition Affect Credit Ratings? A Reexamination of the Effect of Fitch’s Market Share on Credit Ratings in the Corporate Bond Market

2015 ◽  
Vol 50 (5) ◽  
pp. 1011-1035 ◽  
Author(s):  
Kee-Hong Bae ◽  
Jun-Koo Kang ◽  
Jin Wang
Keyword(s):  
Market Share ◽  
Conflict Of Interest ◽  
Credit Rating ◽  
Credit Ratings ◽  
Bond Market ◽  
Corporate Bond ◽  
Industry Effects ◽  
Corporate Bond Market ◽  
Rating Agencies ◽  
The Impact

AbstractWe examine two competing views regarding the impact of competition among credit rating agencies on rating quality: the view that rating agencies do not sacrifice their reputation by inflating firm ratings, and the view that competition among rating agencies arising from the conflict of interest inherent in an “issuer pay” model creates pressure to inflate ratings. Using Fitch’s market share as a measure of competition among rating agencies and controlling for the endogeneity problem caused by unobservable industry effects, we find no relation between Fitch’s market share and ratings, suggesting that competition does not lead to rating inflation.

scholarly journals Do corporate bond rating revisions convey information about earnings and dividend changes?

2012 ◽  
Vol 9 (3) ◽  
pp. 373-393 ◽  
Author(s):  
Steven T. Anderson ◽  
Gurmeet Singh Bhabra ◽  
Harjeet S. Bhabra ◽  
Asjeet S. Lamba
Keyword(s):  
Stock Returns ◽  
Cash Flows ◽  
Corporate Bond ◽  
Bond Rating ◽  
Future Earnings ◽  
Rating Agencies ◽  
Abnormal Stock Returns ◽  
Rating Changes ◽  
Future Cash Flows ◽  
Rating Downgrades

We study the information content of corporate bond rating changes regarding future earnings and dividends. Consistent with previous findings, rating downgrades are associated with negative abnormal stock returns, while rating upgrades appear to be nonevents. For downgrades, earnings decline in the two years prior to and the year of the rating change announcement but increase in the year after the rating review. We also find that rating downgrades are followed by a subsequent downward adjustment in dividends. While rating upgrades follow a period of rising earnings, they do not signal any increase in future earnings and no subsequent dividend adjustments are observed. Overall, our results indicate that rating agencies respond more to permanent changes in cash flows and provide little information, if any, about future cash flows.

scholarly journals Does the Financial Status of Company Affect the Bond Credit Rating? ——Empirical Evidence from China's Shanghai and Shenzhen Stock Exchanges

2021 ◽  
Vol 4 (1) ◽  
Author(s):  
Yuyan Cai
Keyword(s):  
Credit Rating ◽  
Credit Ratings ◽  
Corporate Bonds ◽  
Principal Component ◽  
Corporate Bond ◽  
Stock Exchanges ◽  
Analysis Method ◽  
Financial Status ◽  
Financial Variables ◽  
The Impact

This article takes the companies that publicly issued corporate bonds on the Shanghai and Shenzhen Stock Exchanges from 2006 to 2018 as the research objects selecting six aspects that comprehensively reflect the 17 financial variables in 6 aspects: profitability, operating ability, bond repayment ability, development ability, cash flow and market value of the company. Principal component analysis method and factor analysis method are used to extract the principal factors of these financial indicator variables. That is how an ordered multi-classification Logistic regression model is constructed to test the impact of the Shanghai and Shenzhen Stock Exchanges’ financial status on the corporate bond credit rating. It turns out that the financial status of the Shanghai and Shenzhen Stock Exchanges have an important impact on the credit rating of corporate bonds. The financial status has a greater impact on corporate bonds with credit ratings of A- and AA-, while it has a smaller impact on corporate bonds with credit ratings above AA. The results of this article can help individual and institutional investors prevent risks from investing.

Corporate Bond Markets

2019 ◽  
pp. 113-130
Author(s):  
Kelly E. Carter
Keyword(s):  
Interest Rates ◽  
Credit Ratings ◽  
Corporate Bonds ◽  
Corporate Bond ◽  
Bond Markets ◽  
Bond Prices ◽  
Wall Street ◽  
Yield Curves ◽  
Bond Portfolios ◽  
The Impact

This chapter covers the fundamentals of corporate bond markets. It begins by highlighting the size and importance of these markets, followed by a discussion of the major types of corporate bonds and the process of issuing bonds. Next, the chapter provides a discussion of important relationships between a bond’s price and market interest rates, including the key observation that bond prices move opposite market interest rates. The next topic focuses on duration and convexity, which are techniques to estimate the dollar and percent changes in bond prices for a given change in market interest rates, followed by a discussion of bond immunization, which is a technique used to protect the value of bond portfolios from adverse changes in market interest rates. The final topics covered concern yield curves, credit ratings, and the impact of the Dodd-Frank Wall Street Reform Act of 2010 on corporate bond markets.

scholarly journals ESG Scores and the Credit Market

2020 ◽  
Vol 12 (8) ◽  
pp. 3456 ◽  
Author(s):  
Ga-Young Jang ◽  
Hyoung-Goo Kang ◽  
Ju-Yeong Lee ◽  
Kyounghun Bae
Keyword(s):  
Small Firms ◽  
Credit Rating ◽  
Credit Ratings ◽  
Debt Financing ◽  
Corporate Bond ◽  
Cost Of Debt ◽  
Rating Agencies ◽  
Bond Returns ◽  
The Cost ◽  
The Relationship

This study analyzes the relationship between Environmental, Social and Governance (ESG) scores and bond returns using the corporate bond data in Korea during the period of 2010 to 2015. We find that ESG scores include valuable information about the downside risk of firms. This effect is particularly salient for the firms with high information asymmetry such as small firms. Interestingly, of the three ESG criteria, only environmental scores show a significant impact on bond returns when interacted with the firm size, suggesting that high environmental scores lower the cost of debt financing for small firms. Finally, ESG is complementary to credit ratings in assessing credit quality as credit ratings cannot explain away ESG effects in predicting future bond returns. This result suggests that credit rating agencies should either integrate ESG scores into their current rating process or produce separate ESG scores which bond investors integrate with the existing credit ratings by themselves.

scholarly journals Wpływ COVID-19 na nastawienie i credit ratingi krajów

2020 ◽  
Vol 8 (4) ◽  
pp. 535-564
Author(s):  
Patrycja Chodnicka-Jaworska
Keyword(s):  
Financial Crisis ◽  
Foreign Currency ◽  
Credit Rating ◽  
Credit Ratings ◽  
Short Term ◽  
Rating Agencies ◽  
Thomson Reuters ◽  
The Impact ◽  
The International Monetary Fund

Covid-19 Impact on Countires’ Outlooks and Credit Ratings The aim of the study is to examine the impact of the financial crisis caused by COVID-19 on chang­es in outlooks and credit ratings of major rating agencies. The research hypothesis was as follows: the financial crisis caused by COVID-19 negatively affected the change in outlooks and credit ratings of countries. The study used long-term and short-term credit ratings and outlooks collected from the Thomson Reuters / Refinitiv database regarding liabilities expressed in foreign currency and macroeconomic data from the International Monetary Fund databases, for 2010–2021. The analysis was carried out using ordered logit panel models. The presented results showed a weak significant im­pact of the COVID-19 pandemic on credit rating. The agency that changed its notes in connection with this situation is Standard & Poor’s (S&P). However, the attitude responded to the situation un­der investigation. During the crisis, country ratings have become less sensitive to growing debt, which may be dictated by widespread loosening of fiscal policy. The rate of GDP growth has a par­ticular impact during the COVID-19 period in the event of a change of outlook. Rising inflation is particularly dangerous in the age of pandemics. It may be related to monetary policy easing.

The impact of market sectors and rating agencies on credit ratings: global evidence

2019 ◽  
Vol 20 (5) ◽  
pp. 389-410
Author(s):  
Kerstin Lopatta ◽  
Magdalena Tchikov ◽  
Finn Marten Körner
Keyword(s):  
Credit Risk ◽  
Credit Rating ◽  
Credit Ratings ◽  
Content Type ◽  
Rating Agencies ◽  
Credit Rating Agency ◽  
Rating Agency ◽  
Investment Grade ◽  
The Impact ◽  
Rating Downgrades

Purpose A credit rating, as a single indicator on one consistent scale, is designed as an objective and comparable measure within a credit rating agency (CRA). While research focuses mainly on the comparability of ratings between agencies, this paper additionally questions empirically how CRAs meet their promise of providing a consistent assessment of credit risk for issuers within and between market segments of the same agency. Design/methodology/approach Exhaustive and robust regression analyses are run to assess the impact of market sectors and rating agencies on credit ratings. The examinations consider the rating level, as well as rating downgrades as a further measure of empirical credit risk. Data stems from a large global sample of Bloomberg ratings from 11 market sectors for the period 2010-2018. Findings The analyses show differing effects of sectors and agencies on issuer ratings and downgrade probabilities. Empirical results on credit ratings and rating downgrades can then be attributed to investment grade and non-investment grade ratings. Originality/value The paper contributes to current finance research and practice by examining the credit rating differences between sectors and agencies and providing assistance to investors and other stakeholders, as well as researchers, how issuers’ sector and rating agency affiliations act as relative metrics.

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