The rating decision and the determinants of credit ratings: A UK empirical investigation
Gonis, E. , Paul , S. and Wilson, N. (2012) The rating decision and the determinants of credit ratings: A UK empirical investigation. To be published in International Review of Financial Analysis. ISSN 1057-5219 [Submitted]
Publisher's URL: http://www.journals.elsevier.com/international-rev...
This study examines the determinants of the decision of UK non-financial companies to solicit a credit rating drawing upon the information asymmetry, signalling, agency and default literature. The paper extends the current literature on the determinants of corporate credit ratings by including key non-financial variables. The rating likelihood models are able to distinguish between rated and non-rated companies satisfactorily. Moreover, the estimated rating determinants models reveal that the inclusion of non-financial variables adds to their explanatory power. Finally, the study examines whether the unique attributes shared by rated companies drive their decision to solicit a credit rating. Using a two-stage sample selection framework the results indicate that self-selection is not dominant among UK non-financial companies.
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