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 Impacts of credit rating changes on stock returns

2020 ◽  
Vol 2 (1) ◽  
Author(s):  
Pham Quynh Chau ◽  
Nguyen Thu Hien
Keyword(s):  
Market Efficiency ◽  
Stock Returns ◽  
Stock Prices ◽  
Credit Rating ◽  
Credit Ratings ◽  
Stock Exchanges ◽  
Listed Firms ◽  
Stock Market Efficiency ◽  
Rating Changes ◽  
The Impact

This paper studies the impact of credit ratings issued by CIC, a Vietnamese local rating agency, on stock returns of listed companies on the Vietnamese stock exchanges in the period of 2007-2010. The findings of the study confirm the assertions of the previous researches by Holthausen and Leftwich (1986), Hand, Holthausen and Leftwich (1992), Chan and Poor (2008). Specifically, CIC’s credit ratings slightly affect the stock prices of the listed firms, an evidence supporting CIC’s role and its rating quality to a certain extent. This paper also confirms semi-strong form of the Vietnamese stock market efficiency.

scholarly journals ESG as a Measure of Credit Ratings

Risks ◽  
2021 ◽  
Vol 9 (12) ◽  
pp. 226
Author(s):  
Patrycja Chodnicka-Jaworska
Keyword(s):  
Financial Institutions ◽  
Credit Rating ◽  
Negative Impact ◽  
Credit Ratings ◽  
Stock Exchanges ◽  
Credit Rating Agencies ◽  
Rating Agencies ◽  
Thomson Reuters ◽  
Rating Changes ◽  
The Impact

The aim of this study was to examine the impact of environmental, social, and governance (ESG) measures on credit ratings given to non-financial institutions by the largest credit rating agencies according to economic sector divisions. The hypotheses were as follows: a strong negative impact on non-financial institutions’ credit rating changes will result from ESG risk changes, and the reaction of credit rating changes will vary in different sectors. Panel event models were used to verify these hypotheses. The study used data from the Thomson Reuters Database for the period 2010–2020. The analysis was based on the literature on credit rating determinants and on papers and reports on COVID-19, ESG factors, and their impact on credit rating changes. Linear decomposition was used for the analysis. To verify these hypotheses, long-term issuer credit ratings presented by Moody’s and Fitch for European companies listed on these stock exchanges have been used. In the analyses, financial and non-financial factors were also considered. The results suggested that, within the last year, the methodology presented by credit rating agencies has changed, and ESG factors are one of the basic measures that are used to verify credit rating changes, especially those related to the pandemic.

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 EFFECT OF CREDIT RATING ON CAPITAL STRUCTURE: A STUDY ON NON-FINANCIAL FIRMS IN PAKISTAN

2012 ◽  
Vol 12 (1) ◽  
Author(s):  
Keyword(s):  
Capital Structure ◽  
Credit Rating ◽  
Stock Exchange ◽  
Credit Ratings ◽  
Least Square ◽  
Statistical Tool ◽  
Ordinary Least Square ◽  
Optimal Capital Structure ◽  
Financial Firms ◽  
The Impact

Purpose- Aim of this study was to investigate whether the credit rating is an important determinant other than the firm's characteristic to obtain optimal capital structure focusing on the research hypothesis that the firms with higher credit along with the other factors (FTOA, ROA and Size) tend to have more debt in their capital structure of firms rated by P?CR? and Karachi Stock Exchange (KSE). Methodology/Sample- For this research, sample size of 48 observations (3 years data of 16 firms) was taken on the basis of convenience sampling. Results obtained by using Ordinary Least Square Model (OLS) as statistical tool to test the hypothesis Findings- Analysis clearly suggested that credit ratings do have an impact on firm's capital structure. It was concluded that firms with higher credit ratings along with other factors (FTOA, ROA and Size) do not tend to have more debt in their capital structure. Implications- Outcomes of this research might help investors, debtors and other stakeholders of the firms (rated by PACRA) to understand the impact of credit rating on firm's debt ratio and the overall dynamics and mechanism of capital structure.

scholarly journals Forecasting Credit Ratings of EU Banks

2020 ◽  
Vol 8 (3) ◽  
pp. 49
Author(s):  
Vasilios Plakandaras ◽  
Periklis Gogas ◽  
Theophilos Papadimitriou ◽  
Efterpi Doumpa ◽  
Maria Stefanidou
Keyword(s):  
Credit Rating ◽  
Credit Ratings ◽  
Support Vector ◽  
Credit Rating Agencies ◽  
Selection Scheme ◽  
Explanatory Variables ◽  
Rating Agencies ◽  
Financial Variables ◽  
Forecasting Models ◽  
Banking Institutions

The aim of this study is to forecast credit ratings of E.U. banking institutions, as dictated by Credit Rating Agencies (CRAs). To do so, we developed alternative forecasting models that determine the non-disclosed criteria used in rating. We compiled a sample of 112 E.U. banking institutions, including their Fitch assigned ratings for 2017 and the publicly available information from their corresponding financial statements spanning the period 2013 to 2016, that lead to the corresponding ratings. Our assessment is based on identifying the financial variables that are relevant to forecasting the ratings and the rating methodology used. In the empirical section, we employed a vigorous variable selection scheme prior to training both Probit and Support Vector Machines (SVM) models, given that the latter originates from the area of machine learning and is gaining popularity among economists and CRAs. Our results show that the most accurate, in terms of in-sample forecasting, is an SVM model coupled with the nonlinear RBF kernel that identifies correctly 91.07% of the banks’ ratings, using only 8 explanatory variables. Our findings suggest that a forecasting model based solely on publicly available financial information can adhere closely to the official ratings produced by Fitch. This provides evidence that the actual assessment procedures of the Credit Rating Agencies can be fairly accurately proxied by forecasting models based on freely available data and information on undisclosed information is of lower importance.

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.

Goodwill impairment loss and bond credit rating

2017 ◽  
Vol 25 (1) ◽  
pp. 2-20 ◽  
Author(s):  
Li Sun ◽  
Joseph H. Zhang
Keyword(s):  
Regression Analysis ◽  
Credit Rating ◽  
Credit Ratings ◽  
Negative Relationship ◽  
Least Squares Regression ◽  
Firm Level ◽  
Content Type ◽  
Goodwill Impairment ◽  
The Impact ◽  
The Relationship

Purpose The purpose of this study is to examine the impact of goodwill impairment losses on bond credit ratings. Design/methodology/approach The authors use regression analysis to examine the relationship between goodwill impairment losses and bond credit ratings. Findings The empirical results show a negative relationship between the amount of goodwill impairment losses and bond credit ratings, suggesting that firms with goodwill impairment losses receive lower credit ratings. The authors perform various additional tests, including subsamples in good or bad market time, changes analysis, first time goodwill impairment firms vs subsequent impairment and the two-stage least squares regression analysis to address potential endogeneity issues. The main results persist. Originality/value This paper links and contributes to two streams of literature: goodwill impairment in accounting literature and bond credit ratings in finance literature. Whether a firm’s goodwill impairment losses affect the firm’s bond credit rating remains an interesting question that has not been examined previously. To the best of the authors’ knowledge, this is the first study that directly examines the relationship between goodwill impairment losses and bond ratings at the firm level.

scholarly journals Macroeconomic aspects of banks’ credit ratings

Equilibrium ◽  
2017 ◽  
Vol 12 (1) ◽  
pp. 101 ◽  
Author(s):  
Patrycja Chodnicka-Jaworska
Keyword(s):  
Banking Sector ◽  
Credit Rating ◽  
Risk Estimation ◽  
Credit Ratings ◽  
Value Added ◽  
Positive Influence ◽  
Macroeconomic Factors ◽  
New Information ◽  
Standard And Poor's ◽  
The Impact

Research background: The practical analysis suggests that credit ratings are especially significant for banks. The literature review suggests that in previous analysis researchers usually took into consideration financial factors of the banks’ credit ratings methodology. This article analyses the impact of macroeconomic factors on the banks’ credit ratings. Purpose of the article: The paper examines and analyses the impact of the macroeconomic risk factors on the credit ratings received by banks. In the article, the methodology of credit risk assessment proposed by Moody’s Investor Service and Standard and Poor’s Financial Service is presented. Two hypotheses are put herein. The first one is: Changes in countries’ credit ratings convey new information and influence on banks’ financial condition. The second hypothesis is: A highly-developed, stable economy with an advanced financial market has a positive influence on banks’ credit rating assessment. Methods: The study used banks’ and countries’ ratings assigned by Standard and Poor's and Moody's for the period from 1 January 2005 to 1 January 2016. To verify the hypotheses static panel data models have been applied. Findings and Value added: In credit rating agencies guidelines and previous research, the impact of countries’ credit ratings on those received by banks is not indicated. The impact of macroeconomic factors has not been verified. The analysis confirms that changes in countries’ credit ratings convey new information and influence the banks’ environment condition. But only for the assessment given by S and P the condition of banking sector is an important group of factors. For all verified types of credit ratings the risk of country is presented by countries’ credit rating, not by particular factors. These analyses suggest that during the risk estimation process prepared by banks, a country’s risk represented by its credit ratings should be taken into consideration more often than particular macroeconomic factors.

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.

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