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An Examination of the Association of Firm Credit Ratings with Real Activities Manipulation, Audit Quality, Corporate Governance, and Credit Default Swaps.

Record Type:	Language materials, manuscript : Monograph/item
Title/Author:	An Examination of the Association of Firm Credit Ratings with Real Activities Manipulation, Audit Quality, Corporate Governance, and Credit Default Swaps./
Author:	Browning, Logan.
Description:	1 online resource (148 pages)
Notes:	Source: Dissertation Abstracts International, Volume: 79-01(E), Section: A.
Contained By:	Dissertation Abstracts International79-01A(E).
Subject:	Accounting. -
Online resource:	click for full text (PQDT)
ISBN:	9780355185775

An Examination of the Association of Firm Credit Ratings with Real Activities Manipulation, Audit Quality, Corporate Governance, and Credit Default Swaps.
Browning, Logan.

An Examination of the Association of Firm Credit Ratings with Real Activities Manipulation, Audit Quality, Corporate Governance, and Credit Default Swaps. - 1 online resource (148 pages)

Source: Dissertation Abstracts International, Volume: 79-01(E), Section: A.

Thesis (Ph.D.)

Includes bibliographical references

The subprime crisis and subsequent credit crunch that began in late 2007 and early 2008 had crippling effects on the world's largest economy which led to significant deterioration in the financing ability of all but the most highly rated corporate, municipal, and consumer credit institutions. The credit rating agencies play a vital role in the financing of firms in our economy. The difference of a single rating category can often mean a 100 basis point differential. Thus, even the smallest drop in rating category could cost firms very significant amounts in financing. This illustrates the importance of understanding what information is used as well as what information is not used by credit rating agencies in the credit rating process. This dissertation provides evidence on the association between credit ratings and important firm characteristics documented in the extant literature including real activities manipulation, audit quality, and corporate governance. I also examine whether credit default swaps are associated with these firm characteristics.

Electronic reproduction.
Ann Arbor, Mich. :
ProQuest,
2018

Mode of access: World Wide Web

ISBN: 9780355185775Subjects--Topical Terms:

561166
Accounting.
Index Terms--Genre/Form:

554714
Electronic books.

An Examination of the Association of Firm Credit Ratings with Real Activities Manipulation, Audit Quality, Corporate Governance, and Credit Default Swaps.
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245 1 3 $a An Examination of the Association of Firm Credit Ratings with Real Activities Manipulation, Audit Quality, Corporate Governance, and Credit Default Swaps.
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300 $a 1 online resource (148 pages)
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500 $a Source: Dissertation Abstracts International, Volume: 79-01(E), Section: A.
502 $a Thesis (Ph.D.) $c Kent State University $d 2017.
504 $a Includes bibliographical references
520 $a The subprime crisis and subsequent credit crunch that began in late 2007 and early 2008 had crippling effects on the world's largest economy which led to significant deterioration in the financing ability of all but the most highly rated corporate, municipal, and consumer credit institutions. The credit rating agencies play a vital role in the financing of firms in our economy. The difference of a single rating category can often mean a 100 basis point differential. Thus, even the smallest drop in rating category could cost firms very significant amounts in financing. This illustrates the importance of understanding what information is used as well as what information is not used by credit rating agencies in the credit rating process. This dissertation provides evidence on the association between credit ratings and important firm characteristics documented in the extant literature including real activities manipulation, audit quality, and corporate governance. I also examine whether credit default swaps are associated with these firm characteristics.
520 $a Main sample results indicate there is a strong, negative association between real activities manipulation and firm credit ratings. Further, results show a positive and significant association of audit quality with ratings. Moreover, main sample testing provides weak evidence of a positive association between corporate governance and firm credit ratings; however, this relationship is limited to governance committee existence. Additionally, main sample results provide evidence of a causal link between real activities manipulation, audit quality, and ratings. Managing real activities through deep price discounts to accelerate timing of sales and overproducing inventory to reduce cost of goods sold are linked to future rating downgrades. Beyond this, higher levels of manipulation in general, are linked to future rating downgrades. Some evidence suggests that, under certain conditions, higher audit quality may lead to future rating downgrades. Results of the investment grade sample analysis are largely consistent with that of the main sample.
520 $a Evidence from the speculative grade sample suggests, for firms with higher credit risk, that audit quality shares a positive association with firm credit ratings. However, for speculative grade firms, only limited evidence suggests real activities manipulation (namely the abnormal production costs component) is negatively associated with firm credit ratings. Further testing indicates that even though firms with higher audit quality may have higher ratings, they are also more likely to receive future rating downgrades. Speculative grade firms engaging in real activities manipulations are also found to receive future rating downgrades.
520 $a In small sample analysis, some weak evidence suggests that audit quality and the existence of a governance committee are associated with higher CDS spreads. Results indicate real activities manipulation is not associated with CDS spreads. Moreover, no causal link was established between the variables of interest and CDS spreads. A negative relationship is also documented between CDS spreads and future credit ratings. This evidence of a link between higher (lower) spreads and lower (higher) future ratings is in line with CDS spreads being a signal to ratings agencies prior to rating changes. Yet, this does not provide a direct causal link. No significant relationship is found between CDS spreads and future credit rating changes; thus, no causal link is established. This research may be of interest to academics as well as investors, firms, rating agencies, regulators, and others affected by the credit rating process.
533 $a Electronic reproduction. $b Ann Arbor, Mich. : $c ProQuest, $d 2018
538 $a Mode of access: World Wide Web
650 4 $a Accounting. $3 561166
655 7 $a Electronic books. $2 local $3 554714
690 $a 0272
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710 2 $a Kent State University. $b Accounting. $3 1181961
773 0 $t Dissertation Abstracts International $g 79-01A(E).
856 4 0 $u http://pqdd.sinica.edu.tw/twdaoapp/servlet/advanced?query=10645453 $z click for full text (PQDT)