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Does firm visibility matter to debtholders? Evidence from credit ratings |
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| Institution: | 1. University of Tampa, Sykes College of Business, 401 W. Kennedy Blvd, Tampa, FL 33606-1490, United States of America;2. University of Southern Mississippi, 118 College Drive #5178, Hattiesburg, MS 39406-0001, United States of America;1. Collins College of Business, University of Tulsa, United States of America;2. Crummer Graduate School of Business, Rollins College, United States of America;3. Saunders College of Business, Rochester Institute of Technology, United States of America |
| Abstract: | This paper investigates the role of a firm's information visibility in the assessment of its default risk. We use press coverage to proxy for firm visibility and find that highly visible firms generally have better credit ratings. The positive association between firm visibility and credit ratings arises because (1) press coverage facilitates the generation and dissemination of firm-specific information to market participants and (2) it disciplines the activities of managers and large shareholders. This positive association becomes stronger for firms with more severe information asymmetry or weaker alternative monitoring systems. Our findings contribute to the accounting literature by providing new evidence on the influence of firm visibility in the debt market. |
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