The respective study covers three aspects; factors determining credit rating, credit rating impact on performance of entities and the relation between stock returns and credit rating. The study focuses on the firms listed in Taiwan Stock Exchange (TSE) of Taiwan. The empirical analysis uses the data of 50 firms rated by Taiwan Ratings Corporation (TRC) for the period 2010-2015. Two estimation t...

This paper examines the quality of credit ratings issued by the three major credit rating agencies Moody’s, Standard and Poor’s and Fitch. If credit ratings are informative, then prices of underlying credit instruments such as fixed-income securities and credit default insurance should change to reflect the new credit risk information. Using data on 246 different major fixed-income securities i...

I study the role of credit ratings in crises by introducing a financial market in a coordination game with borrowers that must rollover their debts. The asset price aggregates dispersed private information acting as a public noisy signal. Credit rating agencies use this price to set their ratings. Moreover, agencies know that credit ratings influence lending decisions, thus affecting the credit...

Abstract This paper investigates the incentives of a credit rating agency (CRA) to generate accurate ratings under an advertisement-based business model. To this end, we study two-period endogenous reputation model in which CRA can increase precision its by exerting effort. The receives revenue not from fees, as is standard literature, but through online advertising. We show that provides suffi...

We report on the current state and important older findings of empirical studies on corporate credit ratings and their relationship to ratings of other entities. Specifically, we consider the results of three lines of research: The correlation of credit ratings and corporate default, the influence of ratings on capital markets, and the determinants of credit ratings and rating changes. Results ...

There is a curvilinear relation between credit ratings and acquisitions. Non-investment grade firms make more acquisitions as their improve, consistent with the relaxation of financial constraints. However, this pattern reverses for investment firms, supporting view that such want to preserve rating are concerned about acquisition-related downgrades. Abnormal returns first decrease then increas...