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Credit ratings and firm life-cycle

Author

Listed:
  • Magnus Blomkvist

    (Audencia Business School)

  • Anders Löflund

    (Hanken School of Economics)

  • Hitesh Vyas

Abstract

Credit ratings display an inverse U-shaped relation over the corporate life-cycle. Firms' likelihood to obtain a rating initially increases over the life-cycle as reputation increases and asymmetric information is reduced. As investment opportunities diminish during the shakeout and decline phases the benefit of having a rating decreases. The economic effect is substantial: transitioning from the introduction to the growth phase increases the rating likelihood from 6.7% to 30%.

Suggested Citation

  • Magnus Blomkvist & Anders Löflund & Hitesh Vyas, 2021. "Credit ratings and firm life-cycle," Post-Print hal-02887246, HAL.
    • Handle: RePEc:hal:journl:hal-02887246
    DOI: 10.1016/j.frl.2020.101598
    Note: View the original document on HAL open archive server: https://hal.science/hal-02887246
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    References listed on IDEAS

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    Cited by:

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