신용등급 전망의 정보가치와 신용개선효과

Abstract

Credit ratings play important roles in financial markets such as financial intermediation, risk reduction, and mitigating information asymmetry. However, in terms of providing information regarding a firm’s future credit situation, credit ratings might not be a perfect indicator because of their static nature. Beside credit ratings, rating agencies, such as Moody’s and Standard & Poors, also publish rating watches and rating outlooks. They convey slightly different credit information and can compliment credit ratings. While previous studies cover the role of credit watches in Korea, to our knowledge, it is the first study on how credit rating outlooks affect credit ratings using Korean database. First, we are interested in whether rating outlooks, such as positive, stable, and negative outlooks, indicate how a firm’s future rating looks like. Then, if a firm receives a negative outlook from a rating agency, the firm needs to fix its problems. Otherwise, the agency may downgrade the firm’s credit rating and the downgrade would be critical especially if the firm sits in certain thresholds in ratings, such as A or BB. We consider this chain of actions as a function of credit rating improvement. With credit rating outlooks information from NICE Information Service, we first conduct event studies to examine how the financial markets respond to different rating outlooks. Consistent with previous studies, we find that the stock market negatively responds to negative outlooks with a statistical significance. However, the market’s reaction to positive rating outlooks is not statistically significant. Therefore, bad news may deliver some valuable information to the market, while good news may not. We further investigate how each rating outlook affects under different evaluations of main, scheduled, and unscheduled. Among them, main evaluations have the biggest impacts on stock price. Thus it would be difficult to analyze the effects of scheduled and unscheduled evaluations without considering main evaluations. Then, we analyze factors regarding actual rating downgrades after firms’ receiving negative or positive outlooks. We apply a probit model regression and find the following results. First, firms with higher leverage are more likely to be actually downgraded after receiving a negative outlook, and the result is consistent with previous literature. Second, firms with a credit rating of A+, A0, or A- are more likely affected by “negative outlooks.” We conjecture that if a firm belongs to “A” or higher rating, outside investors may consider the firm as a reliable one because of its “A” status. Finally, we examine factors affecting firms intermediate cumulative abnormal returns(CARs) after receiving downgrading outlooks in multiple regression settings. We find that firms with a relatively higher leverage, a lower growth potential, a higher market risk and a greater probability of falling to default grade suffer from intermediate CARs. However, we observe a strange phenomenon that firms likely to be downgraded to below B- somehow improve their intermediate CARs. We consider this as a potential for credit rating improvements, and believe why credit rating outlooks can complement credit ratings.