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The rating decision and the determinants of credit ratings: A UK empirical investigation

Gonis, Eleimon; Paul, Salima; Wilson, Nicholas

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Authors

Eleimon Gonis

Salima Paul

Nicholas Wilson



Abstract

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.

Citation

Gonis, E., Paul, S., & Wilson, N. The rating decision and the determinants of credit ratings: A UK empirical investigation. Manuscript submitted for publication

Journal Article Type Article
Publicly Available Date Jun 8, 2019
Journal International Review of Financial Analysis
Print ISSN 1057-5219
Publisher Elsevier
Peer Reviewed Peer Reviewed
Keywords credit ratings, rating determinants, rating likelihood, sample selection, self selection, probit, ordered probit
Public URL https://uwe-repository.worktribe.com/output/950396
Publisher URL http://www.journals.elsevier.com/international-review-of-financial-analysis/

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