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Innovation and credit ratings, does it matter? UK evidence

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  • Basil Al-Najjar
  • Mohammed M. Elgammal

Abstract

This study investigates the under-researched topic of credit rating predictions in the United Kingdom, using a sample of credit rated firms from FTSE 350 nonfinancial firms for the period 1999 to 2008. We aim to provide further insights regarding the credit ratings--capital structure hypothesis and to test whether innovation impacts credit ratings. We employed logit model and ordered probit analysis. Our results show that credit ratings are improved by innovation, profitability, growth, size, and reduction of leverage and business risk. However, firms with more innovation activities than internal optimum level have lower ratings. These results provide evidence that credit ratings can be viewed within the context of capital structure theory.

Suggested Citation

  • Basil Al-Najjar & Mohammed M. Elgammal, 2013. "Innovation and credit ratings, does it matter? UK evidence," Applied Economics Letters, Taylor & Francis Journals, vol. 20(5), pages 428-431, March.
    • Handle: RePEc:taf:apeclt:v:20:y:2013:i:5:p:428-431
    DOI: 10.1080/13504851.2012.709589
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    Cited by:

    1. Ren, Xiaohang & An, Yaning & Jin, Chenglu & Yan, Cheng, 2024. "Weathering the policy storm: How climate strategy volatility shapes corporate total factor productivity," Energy Economics, Elsevier, vol. 134(C).
    2. Diéguez-Soto, Julio & Garrido-Moreno, Aurora & Manzaneque, Montserrat, 2018. "Unravelling the link between process innovation inputs and outputs: The moderating role of family management," Journal of Family Business Strategy, Elsevier, vol. 9(2), pages 114-127.
    3. Nwachukwu Ifeoma G & Kalu Edith O & Okoroafor, Stella N, 2024. "Non Financial Perspectives and Firms’ Value of Deposit Money Banks in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(3), pages 933-958, March.
    4. Abdul Rafay & Yang Chen & Muhammad A.B.Naeem & Maham Ijaz, 2018. "Analyzing the Impact of Credit Ratings on Firm Performance and Stock Returns: An Evidence from Taiwan," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 22(3), pages 771-790, Summer.
    5. Jaspreet Kaur & Madhu Vij & Ajay Kumar Chauhan, 2023. "Signals influencing corporate credit ratings—a systematic literature review," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 50(1), pages 91-114, March.
    6. Faiza Sajjad & Muhammad Zakaria, 2018. "Credit Rating as a Mechanism for Capital Structure Optimization: Empirical Evidence from Panel Data Analysis," IJFS, MDPI, vol. 6(1), pages 1-14, January.
    7. Alexi Danchev & Erkan Ilgün, 2013. "Job Performance, Job Satisfaction and Human Capital in the Labour Market in Bosnia," International Journal of Management, Knowledge and Learning, International School for Social and Business Studies, Celje, Slovenia, vol. 2(1), pages 25-44.

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