Does Market Performance (Tobin’s Q) Have A Negative Effect On Credit Ratings? Evidence From South Korea

Abstract Tobin’s Q is an established measure of firm performance, based on investor confidence. However, the association between and credit ratings not well-established in literature. Using a sample Korean listed firms over 2001–2016 period, Probit regression analysis shows that overall, positively associated with ratings. for > 1 (1 <) ratio, negative (positive) relationship exists. Moreover, independent regressions, threshold level if found where effect changes from being positive (0.2), to (0.3). To best our knowledge, we are first demonstrate rating agencies nuanced when making default risk assessments. Specifically, South Korea, exists, at which increasing values reduce Empirical evidence different (market confidence) can extend literature offer insights market participants. Furthermore, because commonly used proxy financial performance accounting lectures, study has practical implications academics classrooms.