Credit ratings and disclosure channels |
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Authors: | Frank Heflin Kenneth W. Shaw John J. Wild |
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Affiliation: | aCollege of Business, Florida State University, 821 Academic Way, Tallahassee, FL 32306, USA;bSchool of Accountancy, University of Missouri, Columbia, MO 65211, USA;cSchool of Business—Grainger Hall, University of Wisconsin at Madison, 975 University Avenue, Madison, WI 53706, USA |
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Abstract: | We study the relation between analysts’ ratings of firms’ credit worthiness and ratings of the quality of firms’ (1) annual report disclosures, (2) quarterly and other disclosures, and (3) manager-analyst communications. We find that credit ratings are better for firms with higher rated annual report disclosures. We also find that marked increases in analyst ratings of annual report quality are accompanied by improvements in credit ratings. We find no relation between credit ratings and analysts’ ratings of either quarterly report disclosures or management-analyst communications. Overall, the results suggest that a commitment to better annual report disclosure is related to a lower cost of credit capital. |
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Keywords: | Capital markets Credit ratings Disclosure Analysts |
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