Credit Ratings and Firm Life-cycle

Magnus Blomkvist; Anders Löflund; Hitesh Vyas

doi:10.1016/j.frl.2020.101598

Credit Ratings and Firm Life-cycle

Magnus Blomkvist
, Anders Löflund^*
, Hitesh Vyas

^*Corresponding author for this work

Finance, Helsinki

Audencia Business School

Research output: Contribution to journal › Article › Scientific › peer-review

17 Citations (Scopus)

Abstract

Credit ratings display an inverse U-shaped relation over the corporate life-cycle. Firms’ likelihood to obtain a rating initially increases over the life-cycle as reputation increases and asymmetric information is reduced. As investment opportunities diminish during the shakeout and decline phases the benefit of having a rating decreases. The economic effect is substantial: transitioning from the introduction to the growth phase increases the rating likelihood from 6.7% to 30%.

Original language	English
Article number	101598
Peer-reviewed scientific journal	Economics Letters
Issue number	5
Number of pages	5
ISSN	0165-1765
DOIs	https://doi.org/10.1016/j.frl.2020.101598
Publication status	Published - 24.05.2020
MoE publication type	A1 Journal article - refereed

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 9 Industry, Innovation, and Infrastructure

Keywords

512 Business and Management
credit ratings
life-cycle
corporate finance
dynamic resource based view

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10.1016/j.frl.2020.101598Licence: CC BY

1-s2.0-S1544612319312747-mainProof, 524 KBLicence: CC BY

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Credit Ratings and Firm Life-cycle

Abstract

UN SDGs

Keywords

Access to Document

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