Sales Order Backlog and Credit Ratings
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Date
2024-05-05
Open Access Location
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Taylor and Francis Group on behalf of the European Accounting Association
Rights
(c) 2024 The Author/s
CC BY-NC-ND 4.0
CC BY-NC-ND 4.0
Abstract
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.
Description
Keywords
order backlog, credit ratings, discretionary accruals
Citation
Habib A, Ranasinghe D, Bhuiyan MBU. (2024). Sales Order Backlog and Credit Ratings. Accounting in Europe. Latest Articles. (pp. 1-27).