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Credit ratings and managerial voluntary disclosures
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He, Guanming (2018) Credit ratings and managerial voluntary disclosures. The Financial Review, official journal of the Eastern Finance Association, 53 (2). pp. 337-378. doi:10.1111/fire.12149 ISSN 1540-6288.
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Official URL: https://doi.org/10.1111/fire.12149
Abstract
This study investigates whether managers influence credit ratings via voluntary disclosures. I find that firms near a rating change have a higher incidence of a disclosure regarding product and business expansion plans. This finding is more evident for firms that are subject to lower proprietary costs of disclosures, which implies that managers do trade off both the benefits and costs of the disclosures. I find no evidence that firms close to a rating change selectively release good news or suppress bad news on product and business expansion. Overall, my results suggest that firms generally exhibit a credible commitment to maintaining disclosure transparency for a desired credit rating.
Keywords: credit ratings; information transparency; commitment to disclosures; product and business expansion plans
JEL Classifications: M41 G24
* Corresponding author. Address: Room 1.116, Warwick Business School, University of Warwick, Coventry, United Kingdom. Phone: +44-7570184501. Email: guanming.he@wbs.ac.uk. I appreciate the helpful comments or advice from Srinivasan Krishnamurthy, an anonymous reviewer, Bin Ke, Clive Lennox, Chuanyang Hwang, Siew Hong Teoh, Stephen Penman, Samuel Bonsall, Michelle Hanlon, April Klein, Wim Van der Stede, Gary Biddle, Chul Park, Stephen Dimmock, Zhaoyang Gu, Huai Zhang, Irem Tuna, and seminar participants at London school of Economics and Political Science, Nanyang Technological University, University of Warwick, University of Hong Kong, Chinese University of Hong Kong, University of Sydney, University of Lethbridge, 2013 American Accounting Association annual meeting, UTS Emerging Accounting Research consortium, and 26thInternational Business Research conference. This paper won a best paper award at the 26thInternational Business Research Conference. Part of the research was conducted when I was affiliated with Nanyang Technological University. All errors are my own.
Item Type: | Journal Article | ||||||||
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Subjects: | H Social Sciences > HG Finance | ||||||||
Divisions: | Faculty of Social Sciences > Warwick Business School > Accounting Faculty of Social Sciences > Warwick Business School |
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Library of Congress Subject Headings (LCSH): | Credit ratings., Financial disclosure., Disclosure in accounting., Disclosure of information., Competition., Corporate profits -- Forecasting -- Mathematical models. | ||||||||
Journal or Publication Title: | The Financial Review, official journal of the Eastern Finance Association | ||||||||
Publisher: | Wiley online | ||||||||
ISSN: | 1540-6288 | ||||||||
Official Date: | May 2018 | ||||||||
Dates: |
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Volume: | 53 | ||||||||
Number: | 2 | ||||||||
Page Range: | pp. 337-378 | ||||||||
DOI: | 10.1111/fire.12149 | ||||||||
Status: | Peer Reviewed | ||||||||
Publication Status: | Published | ||||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||||
Date of first compliant deposit: | 5 June 2017 | ||||||||
Date of first compliant Open Access: | 2 April 2020 |
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