Credit Ratings and Managerial Voluntary Disclosures

He, Guanming

doi:10.1111/fire.12149

Cited by 15 publications

(23 citation statements)

References 72 publications

(107 reference statements)

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“…If both conditions hold, we expect to find a positive association between PBE disclosures and analyst forecast informativeness. Our results support this prediction, which is consistent with and complements two strands of literature which shows that (i) PBE disclosures are value-relevant (Nichols 2010;He 2018) and that (ii) analysts are more sophisticated than investors in processing information (e.g., Chandra et al 1999, Rajgopal et al 2003. We do not find evidence that additional disclosures of PBE information increase or decrease analyst forecast errors.…”

Section: Introductionsupporting

confidence: 91%

“…Various nonfinancial information disclosures are potentially value-relevant. Most such disclosures are made on a voluntary basis, covering issues such as corporate social responsibility (e.g., Dhaliwal et al 2011, Dhaliwal et al 2012, Cormier and Magnan 2014, corporate environmental policies (e.g., Beets andSouther 1999, Aerts et al 2008), customer relationship (e.g., Luo et al 2010, Ngobo et al 2012, intellectual capital (e.g., Hsu and Chang 2011), research and development expenditures (e.g., Barron et al 2002, Jones 2007, Xu et al 2007, and product and business expansion plans (e.g., Nichols 2010, He 2018. Evidence suggests that corporate nonfinancial disclosures can affect analyst forecast decisions (e.g., Lang and Lundholm 1996, Aerts et al 2008, Simpson 2010.…”

Section: Introductionmentioning

confidence: 99%

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Do voluntary disclosures of product and business expansion plans impact analyst coverage and forecasts?

Marginson

Dai

2019

Accounting and Business Research

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We investigate whether voluntary disclosures of product and business expansion plans affect analyst coverage and forecasts. We find that the level of analyst coverage is positively associated with the incidence of disclosures of product and business expansion plans. We also find that product and business expansion disclosures increase the informativeness of analyst earnings forecasts. We find no evidence that product and business expansion disclosures increase analyst forecast errors. Overall, our study contributes to understanding the role of product and business expansion disclosures in analyst forecast behaviour.

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Section: Introductionsupporting

confidence: 91%

Section: Introductionmentioning

confidence: 99%

Do voluntary disclosures of product and business expansion plans impact analyst coverage and forecasts?

Marginson

Dai

2019

Accounting and Business Research

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“…Publicly released risk disclosures matter for credit rating agencies for two main reasons (He, 2018). First, publicly disclosed risk information is subject to scrutiny from both external investors and legal agencies.…”

Section: Literature Review: Theory Empirics and Research Hypotheses mentioning

confidence: 99%

“…In such a sense, the publicly released disclosures are more credible than private communications (e.g., Armstrong, Guay, & Weber, 2010; Bushman, Piotroski, & Smith, 2004). He (2018) finds that managers possess no legal accountability for privately circulating incorrect or misleading information to BCR agencies. Second, publicly released risk information could impact the anticipated value of a company's future cash flow over forming and/or changing market expectations.…”

Section: Literature Review: Theory Empirics and Research Hypotheses mentioning

confidence: 99%

“…Furthermore, He (2018) suggests that managers have a motivation to sustain or accomplish a favourable credit rating irrespective of the rating agency's knowledge and insights about a firm's creditworthiness. Current research suggests that the benefits (costs) related to a credit rating change tend to influence decision‐making about capital structure (e.g., Kisgen, 2006, 2009) and firm financing choices (Hovakimian, Kayhan, & Titman, 2010).…”

Section: Introductionmentioning

confidence: 99%

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Are bank risk disclosures informative? Evidence from debt markets

et al. 2020

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This study examines whether financial reporting with a specific focus on risk disclosures have a predictive (informative) effect on banks' credit ratings (BCRs) and, consequently, ascertains whether governance structures can moderate such an association. Using one of the largest bank‐level datasets collected from 12 Middle East and North African (MENA) countries over the 2006–2013 period to‐date, our findings are as follows. First, we find that risk disclosures have a predictive effect on BCRs. Second, we find that the relationship between risk disclosures and BCRs is contingent on the quality of governance structures. Specifically, we find that the informativeness of risk disclosures on BCRs is higher in banks with larger board size, greater independence, higher government ownership, and better Shariah supervisory board, but lower in banks with greater block ownership, higher foreign ownership and the presence of CEO duality. The central tenor of our findings remains unchanged after controlling for a number of firm‐ and country‐level factors, alternative risk disclosure measures, firm‐ and national‐level governance proxies, different types of banks, and potential endogeneities. The findings have important implications for investors, especially bondholders, standard‐setters, regulators, and central governments.

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The Role of Earnings Management in Equity Valuation

Shen

2021

Encyclopedia of Finance

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The intrinsic value of a firm's equity is determined by the present value of future payoffs to equity-holders. Thus, to estimate equity value, one needs to identify and process a series of information that is relevant to the present value of expected future payoffs. Among the valuerelevant information, earnings pertain to a summary measure of firm performance, and thus play a key role in the equity valuation. Nevertheless, it is not uncommon in practice that firm managers either intentionally or unintentionally misreport earnings, making valuation challenging for outsiders. This chapter aims to explore the role earnings management plays in equity valuation, and how market participants may detect and adjust for misreported earnings, if any, in their forecasts and valuation for a firm. The chapter is organized to comprise the following sections: (i) varied managerial incentives for earnings management; (ii) various tactics of earnings management via accruals manipulation; (iii) various tactics of earnings management via real activities manipulation; (iv) consequences and determinants of earnings management; (v) trade-off between accruals manipulation and real activities manipulation to manage earnings; (vi) how to discern and measure earnings management; (vii) introduction of various equity-valuation models; (viii) how to adjust for the effects of accruals-based and real earnings management in equity valuation.

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Credit Ratings and Managerial Voluntary Disclosures

Cited by 15 publications

References 72 publications

Do voluntary disclosures of product and business expansion plans impact analyst coverage and forecasts?

Do voluntary disclosures of product and business expansion plans impact analyst coverage and forecasts?

Are bank risk disclosures informative? Evidence from debt markets

The Role of Earnings Management in Equity Valuation

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