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Unveiling the impact of foreign competition on the bond market: Insights from S&P debt ratings

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  • Lasantha, Ruwan
  • Tawiah, Vincent
  • Atif, Muhammad
  • Puwanenthiren, Prem
  • Nadarajah, Sivathaasan

Abstract

This study investigates the influence of foreign competition on U.S. firms’ debt ratings. The findings reveal a significant downgrade in ratings with increased foreign competition, in particular affecting firms with prospector strategies, low organizational capital, high information asymmetry, weak governance, and reshaping creditworthiness assessment.

Suggested Citation

  • Lasantha, Ruwan & Tawiah, Vincent & Atif, Muhammad & Puwanenthiren, Prem & Nadarajah, Sivathaasan, 2024. "Unveiling the impact of foreign competition on the bond market: Insights from S&P debt ratings," Economics Letters, Elsevier, vol. 241(C).
    • Handle: RePEc:eee:ecolet:v:241:y:2024:i:c:s0165176524002817
    DOI: 10.1016/j.econlet.2024.111797
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    References listed on IDEAS

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    1. David Autor & David Dorn & Gordon H. Hanson & Gary Pisano & Pian Shu, 2020. "Foreign Competition and Domestic Innovation: Evidence from US Patents," American Economic Review: Insights, American Economic Association, vol. 2(3), pages 357-374, September.
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    4. Atawnah, Nader & Balachandran, Balasingham & Duong, Huu Nhan & Podolski, Edward J., 2018. "Does exposure to foreign competition affect stock liquidity? Evidence from industry-level import data," Journal of Financial Markets, Elsevier, vol. 39(C), pages 44-67.
    5. Klaus M. Schmidt, 1997. "Managerial Incentives and Product Market Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(2), pages 191-213.
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    More about this item

    Keywords

    Foreign competition; Debt ratings; Governance; Creditworthiness;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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