Credit ratings and firm life-cycle

Magnus Blomkvist, Anders Löflund*, Hitesh Vyas

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

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 languageEnglish
Article number101598
Peer-reviewed scientific journalEconomics letters
Issue number5
Number of pages5
ISSN0165-1765
DOIs
Publication statusPublished - 24.05.2020
MoE publication typeA1 Journal article - refereed

Keywords

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

Sustainable Development Goals

  • GOAL 09: Industry, Innovation and Infrastructure

Areas of Strength and Areas of High Potential (AoS and AoHP)

  • AoS: Financial management, accounting, and governance

Fingerprint Dive into the research topics of 'Credit ratings and firm life-cycle'. Together they form a unique fingerprint.

  • Cite this