Professor Jon Tucker Jon.Tucker@uwe.ac.uk
Emeritus Professor in Finance
Rating or no rating? That is the question: An empirical examination of UK companies
Tucker, Jon; Gonis, Eleimon; Paul, Salima
Authors
Eleimon Gonis
Salima Paul
Abstract
The aim of this paper is to examine the main determinants of the rating likelihood of UK companies. We use a binary probit specification to model the main drivers of a firm's propensity to be rated. Using a sample of 245 non-financial UK companies over the period 1995-2006, representing up to 2872 firm years, the study establishes important differences in the financial profiles of rated and non-rated firms. The results of the rating likelihood models indicate that the decision to obtain a rating is driven by a company's financial risk, solvency, default risk, public debt issuance, R&D, and institutional ownership, thus identifying a wider range of determinants and extending the current literature. The study also finds that the rating decision can be modelled by means of a contemporaneous or predictive specification without any loss of efficiency or classification accuracy. This offers support to the argument that the rating process is fundamentally forward-looking. © 2012 Copyright Taylor and Francis Group, LLC.
Citation
Tucker, J., Gonis, E., & Paul, S. (2012). Rating or no rating? That is the question: An empirical examination of UK companies. European Journal of Finance, 18(8), 709-735. https://doi.org/10.1080/1351847X.2011.649215
Journal Article Type | Article |
---|---|
Publication Date | Sep 1, 2012 |
Deposit Date | Feb 25, 2013 |
Publicly Available Date | Nov 15, 2016 |
Journal | European Journal of Finance |
Print ISSN | 1351-847X |
Electronic ISSN | 1466-4364 |
Publisher | Taylor & Francis (Routledge) |
Peer Reviewed | Peer Reviewed |
Volume | 18 |
Issue | 8 |
Pages | 709-735 |
DOI | https://doi.org/10.1080/1351847X.2011.649215 |
Keywords | credit ratings, rating likelihood, rating determinants, probit |
Public URL | https://uwe-repository.worktribe.com/output/960604 |
Publisher URL | http://dx.doi.org/10.1080/1351847X.2011.649215 |
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