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时间:2010-10-02 18:20来源:www.ukthesis.org 作者:英国论文网 点击联系客服: 客服:Damien

The Effects of Corporate Governance on Firms’ Credit Ratings Hollis Ashbaugh
University of Wisconsin – Madison

The Effects of CG on Firms' Credit Ratings

We would like to thank Sanjeev Bhojraj, Bob Bowen, Tom Dyckman, Paul Hribar, April Klein,
S. P. Kothari, Charles Lee, Mark Nelson, Shiva Rajgopal, D. Shores, Joe Weber, Peter Wysocki,
and seminar participants at Cornell, Iowa State University, Lancaster University, London
Business School, MIT, and the University of Washington for helpful comments and suggestions.
We especially thank Johannes Ledolter for useful discussions on implementation and
interpretation of ordered logit models.
The Effects of Corporate Governance on Firms’ Credit Ratings
Abstract
Using a framework for evaluating corporate governance recently developed by Standard & Poor’s, this
study investigates whether firms that exhibit strong governance benefit from higher credit ratings relative
to firms with weaker governance. We document, after controlling for risk characteristics, that firm credit
ratings are: (1) negatively associated with the number of blockholders that own at least a 5% ownership in
the firm; (2) positively related to weaker shareholder rights in terms of takeover defenses; (3) positively
related to the degree of financial transparency; and (4) positively related to over-all board independence,
board stock ownership and board expertise, and negatively related to CEO power on the board. We also
provide evidence that CEOs of firms with speculative grade credit ratings are overcompensated to a
greater degree than their counterparts at firms with investment grade ratings, and that the
overcompensation exceeds the CEO’s share of additional debt costs related to lower credit ratings. Our
study provides insights into the characteristics of governance that are likely to affect the cost of debt
financing and provides one explanation for why some firms continue to operate with weaker governance
when doing so may mean lower credit ratings.
JEL classification: G30; G32; M41

Keywords: Corporate governance, Credit rating, Executive compensation
1
The Effects of Corporate Governance on Firms’ Credit Ratings
I. Introduction
This paper investigates whether firms that possess strong corporate governance benefit from higher
overall credit ratings relative to firms with weak governance. Firms’ overall credit ratings reflect a rating
agency’s opinion of an entity's overall creditworthiness and its capacity to satisfy its financial obligations
(Standard and Poor’s 2004). Credit agencies are concerned with governance because weak governance
can impair a firm’s financial position and leave debt stakeholders (hereafter referred to as bondholders)
vulnerable to losses (FitchRatings 2004). To structure our analysis, we adopt the framework recently
developed by Standard and Poor’s for rating firms’ corporate governance structures and practices(责任编辑:charlie)



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