Journal Articles

Permanent URI for this collectionhttps://mro.massey.ac.nz/handle/10179/7915

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Start date: 2024Subject: search.filters.subject.credit ratings

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    Carbon assurance: Does it have an impact on credit ratings?
    (John Wiley and Sons Australia, Ltd on behalf of Accounting and Finance Association of Australia and New Zealand, 2025-02-08) Safiullah M; Nguyen LTM; Houqe MN; Batten J
    This paper examines the impact of firm-level carbon assurance on credit ratings among U.S. publicly traded firms. The findings reveal a positive relationship, indicating that carbon assurance enhances credit ratings by reducing information asymmetry and attracting analyst following. These results are robust to alternative measures of variables, model specifications, and endogeneity tests. U.S. firms with higher carbon assurance benefit from improved creditworthiness, particularly in competitive markets and Democratic-leaning states. These findings support signalling theory and show the strategic importance of carbon assurance in credit assessments and corporate sustainability.
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    Sales Order Backlog and Credit Ratings
    (Taylor and Francis Group on behalf of the European Accounting Association, 2024-05-05) Habib A; Ranasinghe D; Bhuiyan MBU
    This study examines the association between sales order backlog and credit ratings. We posit that credit rating agencies consider order backlog as a positive signal about strong future demand and incorporate that into their rating decisions and provide higher ratings to firms with substantial order backlogs. However, being a non-GAAP, unaudited metric, order backlog could also reduce financial reporting quality and hence, credit ratings of firms. Using a sample of US firms from 1980 to 2017, we find a positive and significant association between order backlog and credit ratings, suggesting that order backlog serves as a valuable measure in credit rating assessment by providing positive signals about future earnings to rating agencies.
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    Asymmetric trading responses to credit rating announcements from issuer- versus investor-paid rating agencies
    (John Wiley and Sons, Ltd, 2024-01) Nguyen QMP; Do HX; Molchanov A; Nguyen L; Nguyen NH
    The credit rating industry has traditionally followed the “issuer-pays” principle. Issuer-paid credit rating agencies (CRAs) have faced criticism regarding their untimely release of negative rating adjustments, which is attributed to a conflict of interests in their business model. An alternative model based on the “investor-pays” principle is arguably less subject to the conflict of interest problem. We examine how investors respond to changes in credit ratings issued by these two types of CRAs. We find that investors react asymmetrically: They abnormally sell equity stakes around rating downgrades by investor-paid CRAs, while abnormally buying around rating upgrades by issuer-paid CRAs. Our study suggests that, through their trades, investors capitalize on value-relevant information provided by both types of CRAs, and a dynamic trading strategy taking advantage of this information generates significant abnormal returns.