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%.
- 512 Business and Management
- credit ratings
- corporate finance
- dynamic resource based view
Areas of Strength and Areas of High Potential (AoS and AoHP)
- AoS: Financial management, accounting, and governance