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. Under consideration for publication in International Review of Financial Analysis. ISSN 1057-5219 [Submitted]

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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.

Item Type:Article
Uncontrolled Keywords:credit ratings, rating determinants, rating likelihood, sample selection, self selection, probit, ordered probit
Faculty/Department:Faculty of Business and Law > Department of Business Management
ID Code:16416
Deposited By: Dr E. Gonis
Deposited On:25 Jan 2012 12:10
Last Modified:05 Dec 2013 01:37

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