The Impact of Credit Ratings on Corporate Behavior

UNIVERSITY OF TECHNOLOGY SYDNEY
Finance Discipline Group 
Research Seminars in Finance
 
Topic: The Impact of Credit Ratings on Corporate Behavior: Evidence from Moody’s Adjustments
 
Speaker: Darren J. Kisgen, Boston College
 
Abstract:      

Moody’s adjusts a firm’s reported leverage across several dimensions to determine credit ratings.  I find that changes to this adjustment methodology affects firm capital structure and investment decisions.  In particular, in 2006, Moody’s made several changes to its adjustment methodologies, which are arguably exogenous to changes in firm fundamentals.  I first show these changes significantly affected adjustments for firms in this year. I then show that these changes to adjustments made in 2006 affect capital structure and investment decisions in 2007, especially for those firms most affected by these methodology changes.  These results show that rating agencies have the power to affect firm financing and real decisions.

 
A light lunch will be provided at 1p.m. Please RSVP for catering purposes to Mala Kapahi by 12 noon on Monday, 2nd April 2018.
 
Date: Wednesday, 4th April 2018     
Time: 12.00 – 1.00 p.m.
Venue: University of Technology, Sydney
             Building 8, Room 8.002, Dr Chau Chak Wing Building
             Dr Chau Chak Wing Building
            14 - 28 Ultimo Road, Ultimo
 
Co-ordinator: Kris Glover  (Ph: +61 2 9514 7778)
 
Enquiries: Mala Kapahi (Ph: +61 2 9514 7777)
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UTS acknowledges the Gadigal people of the Eora Nation, the Boorooberongal people of the Dharug Nation, the Bidiagal people and the Gamaygal people, upon whose ancestral lands our university stands. We would also like to pay respect to the Elders both past and present, acknowledging them as the traditional custodians of knowledge for these lands.