The effects of corporate governance on firms’ credit ratings

We investigate whether firms with strong corporate governance benefit from higher credit ratings relative to firms with weaker governance. We document, after controlling for firm-specific risk characteristics, that credit ratings are negatively associated with the number of blockholders and CEO power, and positively related to takeover defences, accrual quality, earnings timeliness, board independence, board stock ownership, and board expertise. We also provide evidence that CEOs of firms with speculative-grade credit ratings are overcompensated to a greater degree than their counterparts at firms with investment-grade ratings, thus providing one explanation for why some firms operate with weak governance.

Source
Journal of Accounting and Econom
Length of Resource
41 pages
Author
Hollis Ashbaugh-Skaife, Daniel W. Collins, Ryan LaFond
Date Published
Publication Type
paper
Resource Type
academic

ResourceID: 142230

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