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The effect of financial statement comparability on the gaps between credit ratings and bond implied ratings: Focusing on the moderating effect of Korean business groups

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  • Kim, Tae-San
  • Kim, Yong-Shik

Abstract

This study analyzes whether financial statement comparability (FSC) affects the gaps between credit ratings (CRs) and bond implied ratings (BIRs), and Korean business groups mitigate the relation between FSC and rating gaps. Korean business groups have the diversified corporate governance structure and complex circulating investments, which makes it difficult for outside stakeholders to compare accounting information between firms in the same industry. Therefore, we propose the hypothesis that business groups are likely to moderate the negative relation between FSC and rating gaps. We find evidence, consistent with the hypotheses, that rating gaps are lower when FSC is greater. It also documents that business groups mitigate the negative relation between FSC and rating gaps. To the best of our knowledge, this research is the first empirical study to test the relation between FSC and rating gaps and the moderating effect of Korean business groups.

Suggested Citation

  • Kim, Tae-San & Kim, Yong-Shik, 2024. "The effect of financial statement comparability on the gaps between credit ratings and bond implied ratings: Focusing on the moderating effect of Korean business groups," International Review of Financial Analysis, Elsevier, vol. 96(PA).
    • Handle: RePEc:eee:finana:v:96:y:2024:i:pa:s1057521924005702
    DOI: 10.1016/j.irfa.2024.103638
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    More about this item

    Keywords

    Comparability; Rating gaps; Credit ratings; Bond implied ratings; Business groups;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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