Credit ratings and corporate disclosure behaviour: evidence from regulation fair disclosure in Korea

Oh, Frederick Dongchuhl; Park, Junghum

doi:10.1080/00036846.2016.1262521

Cited by 12 publications

(7 citation statements)

References 34 publications

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“…The coefficients relating to the financial characteristics of the banks, which constitute our samples, have the expected signs. Consistent with previous research (Horrigan,1966;Skaife et al2006;Kaplan and Urwitz,1979;Grassa 2015 andOh andPark, 2017) and with the exception of those from model 3, the results of the regression analysis document generally that there is a positive association between credit rating, bank size and bank profitability and that there is significantly negative association between credit rating and leverage at the 5 % level. For the three models, there is, also, a significantly negative correlation between bank age and credit rating.…”

Section: Insert Table 6 Heresupporting

confidence: 87%

“…Other studies provide evidence that larger firms and firms with lower debt have better ratings. Foreign ownership and blockholders are expected, also, to induce more risk disclosure because managers may be willing to reduce monitoring costs, caused by foreign ownership, through voluntary disclosure and, hence, this has a positive effect on the credit ratings (Horrigan, 1966;Urwitz1979, Skaife, Collins, andGrassa 2015;Oh and Park, 2017;Al Alali et al, 2012). For country-level control, we used two variables: namely, GDP and Business extent of disclosure index.…”

Section: Control Variablesmentioning

confidence: 99%

“…Despite the growing interest in the interaction between credit rating and corporate disclosure behavior in the financial marketplace (e.g. Bozanic and Kraft, 2014;Oh and Park, 2017;Bonsall and Miller, 2017;He, 2018), little attention has been paid on whether and how banks' transparency about their risk profile influence rating analysts' assessments of their credit worthiness and viability. As previous studies suggest, CRAs tend to disagree more about the evaluation of banks' credit risks than about their credit risk measurements of other sectors (Cantor and Parker, 1996;Morgan, 2002 andTarashev, 2011).…”

Section: Introductionmentioning

confidence: 99%

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Is bank creditworthiness associated with risk disclosure behavior? Evidence from Islamic and conventional banks in emerging countries

Grassa

Moumen

Hussainey

2020

Pacific-Basin Finance Journal

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Section: Insert Table 6 Heresupporting

confidence: 87%

Section: Control Variablesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Is bank creditworthiness associated with risk disclosure behavior? Evidence from Islamic and conventional banks in emerging countries

Grassa

Moumen

Hussainey

2020

Pacific-Basin Finance Journal

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“…suggests that the highest rating AAA is described as having "extremely strong capacity to meet financial commitments", while the lowest rating D means "payment default on a financial commitment or breach of an imputed promise". In addition, the investment grade (BBB− to AAA) and speculative grade (D to BB+) are classified to present a lower or much higher risk of default [30]. This classification is mainly for conservative or aggressive investors to make investment decisions.…”

Section: Construct Risk Measuresmentioning

confidence: 99%

The Bias Analysis of Oil and Gas Companies’ Credit Ratings Based on Textual Risk Disclosures

2022

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Credit rating bias would affect the capital funding of oil and gas companies, and thus influence the development of the whole economy. Credit rating bias has been mostly analyzed based on different quantitative data sources, and inconsistent results have been obtained. This study first analyzes credit rating bias from the perspective of qualitative textual risk disclosures. By comparing the external credit rating with the internal risk perception expressed in the textual risk disclosures of Form 10-K filings, we can study the consistency of risk assessment of the company by the company’s management and the third-party rating agency. To be specific, four internal textual risk measures and one external risk measure are constructed to quantify the internal risk perception and external risk assessment on oil and gas companies. Then, Spearman’s rho is applied to measure the direction and magnitude of credit rating bias. In the experiment, based on the 357 samples of 174 U.S. oil and gas companies, ranging from 2009 to 2018, we find that the credit ratings mostly overestimate the internal risks perceived by the company managers, and the bias is becoming larger with the credit ratings downgraded from AAA to D.

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“…Few studies have explained the channel by which religiosity influences the economic output of the firm. Oh and Shin (2020) mention that religiosity affects corporate disclosure through social trust. Our study tries to fill some literature gaps by exploring another channel based on the conservative rule of US GAAP.…”

Section: Introductionmentioning

confidence: 99%

Religiosity, financial distress and R&D accounting treatment in US context

Gharbi,

Hamed-Sidhom,

Hussainey

2023

JAAR

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PurposePrior research shows that religiosity affects the degree of managers' risk aversion. As a result, religious firms are less likely to invest in R&D activities. Moreover, US GAAP treats these investments as expenses. For this reason, religious firms have fewer expenses in their earnings and are less likely to be in financial distress.Design/methodology/approachData are collected from Worldscope and the Churches and Church Membership files of the American Religion Data Archive website from 1985 to 2018. With 18,199 observations in US context, the authors used the marginal effect to test the mediating effect of R&D accounting treatment.FindingsThe authors find that the marginal effect of religiosity on financial distress with US GAAP is higher than the marginal effect of religiosity on financial distress with capitalization of R&D costs, which means that accounting treatment can explain the relation between religiosity and financial distress in the US context.Research limitations/implicationsThe authors used linear interpolation and linear extrapolation data to be able to conduct this research over a period of 1985–2018. For future researches, the authors propose to test other factors which can explain the relationship between religiosity and financial distress based on the ethics element.Practical implicationsThese results should be of interest to regulators because treating R&D activities as expenses can destroy the accounting performance of firms that prefer investing in risky projects. This favoritism prevents the comparison between two firms in the same industry with different risk-taking behaviors. This problem is more prevalent if the authors have two firms with different ratios of religiosity. This paper suffers from a major limitation related to data availability.Originality/valueThis may be the first study that investigates why religious firms are less likely to be in financial distress. This paper notes that religious firms are less likely to be in financial distress because their conservative behavior towards R&D activities coincides with the conservative R&D accounting treatment. In fact, the mismatch between expenses and revenues from R&D activities can cause financial distress.

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Credit ratings and corporate disclosure behaviour: evidence from regulation fair disclosure in Korea

Cited by 12 publications

References 34 publications

Is bank creditworthiness associated with risk disclosure behavior? Evidence from Islamic and conventional banks in emerging countries

Is bank creditworthiness associated with risk disclosure behavior? Evidence from Islamic and conventional banks in emerging countries

The Bias Analysis of Oil and Gas Companies’ Credit Ratings Based on Textual Risk Disclosures

Religiosity, financial distress and R&D accounting treatment in US context

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