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

Gonis, Eleimon; Paul, Salima; Wilson, Nicholas

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
• 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