The determinants of issuersâ€™ long term credit ratings : American S&amp;P500 index

Krichene, ِِAfef Feki; Khoufi, Walid

doi:10.14419/ijaes.v3i1.4631

Cited by 7 publications

(6 citation statements)

References 20 publications

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“…In general, corroborating the findings of Krichene and Khoufi (2016) for firms in the United States, the results of this study show that, in the absence of corporate governance mechanisms, the sovereign rating of Latin American countries is an important factor that is considered by companies when choosing their capital structures. The evidence rejects the first hypothesis (H1) for leverage and long-term debt and confirms it for long-term debt and debt to equity.…”

Section: Model Analysissupporting

confidence: 89%

“…Several studies have analyzed the influence of the macroeconomic environment on firms' debt and performance (Bernardo et al, 2018;Dierker et al, 2019;Hromei, 2021;Jesuka et al, 2021). From the agency theory perspective, corporate ratings issued by major rating agencies -Standard & Poor's, Fitch Rating, Moody's Investor -are also used as a tool to investigate issuers' debt strategies and governance quality (Kisgen, 2019;Krichene & Khoufi, 2016;Rogers et al, 2016). Chen et al (2016a) explained that the rating issued by rating agencies indicates the level of default risk of a capital borrower as well as its ability to honor its commitments on due time.…”

Section: Introductionmentioning

confidence: 99%

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The Effects of Sovereign Rating and Corporate Governance on The Capital Structure of Latin American Companies

Jesuka

Peixoto

2023

BAR, Braz. Adm. Rev.

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1 BAR -Brazilian Administration Review encourages data sharing but, in compliance with ethical principles, it does not demand the disclosure of any means of identifying research subjects.Plagiarism Check: BAR maintains the practice of submitting all documents received to the plagiarism check, using specific tools, e.g.: iThenticate.Peer review: is responsible for acknowledging an article's potential contribution to the frontiers of scholarly knowledge on business or public administration. The authors are the ultimate responsible for the consistency of the theoretical references, the accurate report of empirical data, the personal perspectives, and the use of copyrighted material. This content was evaluated using the double-blind peer review process. The disclosure of the reviewers' information on the first page is made only after concluding the evaluation process, and with the voluntary consent of the respective reviewers.

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Section: Model Analysissupporting

confidence: 89%

Section: Introductionmentioning

confidence: 99%

The Effects of Sovereign Rating and Corporate Governance on The Capital Structure of Latin American Companies

Jesuka

Peixoto

2023

BAR, Braz. Adm. Rev.

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“…The study concluded the likelihood of higher credit ratings is more with higher turnover in corporate assets. Feki and Khoufi (2015), in their study, analyzed the effects of financial factors and business profile characteristics on credit ratings issued for the S&P500 firms by Moody's. The results indicated that size, interest, and debt coverage, firms' financial policy and liquidity have a significant effect on credit ratings.…”

Section: Review Of Literature and Theoretical Framework Of The Studymentioning

confidence: 99%

“…Rating agencies consider a number of financial factors (like size, liquidity, profitability, leverage, cash flows, growth, dividend payout, etc.) for rating the companies (Bone, 2010; Feki & Khoufi, 2015; ICRA, 2017; Ministry of Finance, 2009; Murcia et al, 2014; Venkiteshwaran, 2014). Based on literature review, six financial factors are selected and examined in the present study.…”

Section: Review Of Literature and Theoretical Framework Of The Studymentioning

confidence: 99%

Financial determinants of corporate credit ratings: An Indian evidence

Gupta

2021

Int. J Fin Econ

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Credit rating is a vital tool in the hands of investors and other users. Standard mathematical formulas do not exist for determining credit ratings. Instead, rating agencies exercise their judgment and use their experience to determine what information is to be important in providing a rating. Thus, knowledge and understanding about factors influencing credit ratings is very crucial for companies being rated and other users. Most of the prior studies in related context have used developed countries' data, and the effect in emerging markets, especially in Indian context, is still unclear due to lack of such studies. So, this study attempts to identify the long-term and short-term financial determinants of credit ratings issued to Indian companies and examines their impact on credit ratings on the basis of panel data and cross-sectional approaches. Ordered probit analysis is used with credit ratings as the dependent variable and six financial factors as the independent variables. Results indicate that size, profitability and leverage have a significant relationship with corporate credit ratings in both panel data and cross-sectional approaches. Also, size has the highest impact on credit ratings followed by leverage and profitability in both the approaches. The major contribution of present study is that two different mathematical models are framed which have a reasonably well correct prediction percentage. These models can be used by the investors' academicians, practitioners and other users for predicting the rating categories of various companies and to get a fair idea about their creditworthiness and safety.

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“…In a previous study (Feki et al, 2015), using an ordered probit model, we have examined the impact that various financial and business profile variables have on credit ratings issued for the S&P 500 index firms by Moody. The results indicate that firms' financial policy, size and liquidity are significant but interest coverage and debt coverage ratios have the most pronounced effect on credit ratings.…”

Section: Introductionmentioning

confidence: 99%

On the Nonlinearity of the Financial Ratios-Credit Ratings Relationship

Krichene¹,

Khoufi²

2016

AFA

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In this paper, we study the specificity of financial ratios in determining credit ratings. Specifically, we examine the nonlinearity of the financial ratios-credit ratings relationship. Among financial ratios, the interest coverage and debt coverage ratios have the most pronounced effect on credit ratings. To determine the form of the nonlinearity, the interest and debt coverage ratios are divided to four sub-variables with different weights associated to each increment. We find that different coefficients are associated to different increments of the interest coverage and debt coverage ratios. An interest coverage ratio loses all significance when it is less than zero and when it exceeds 20. Similarly, a debt coverage ratio loses all significance when it less than negative one and when it exceeds one. Our results confirm the nonlinearity of the financial ratios-credit rating relationship.

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The determinants of issuersâ€™ long term credit ratings : American S&P500 index

Cited by 7 publications

References 20 publications

The Effects of Sovereign Rating and Corporate Governance on The Capital Structure of Latin American Companies

The Effects of Sovereign Rating and Corporate Governance on The Capital Structure of Latin American Companies

Financial determinants of corporate credit ratings: An Indian evidence

On the Nonlinearity of the Financial Ratios-Credit Ratings Relationship

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