Determinants of credit ratings and their impact as a measure of financial performance

• Ano de defesa: 2023
• Autor(a) principal: Oliveira, Nazário Augusto de
• Orientador(a): Basso, Leonardo Fernando Cruz
• Tipo de documento: Dissertação
• Tipo de acesso: Acesso aberto
• Idioma: eng; por
• Instituição de defesa: Universidade Presbiteriana Mackenzie
• País: Brasil
• Palavras-chave em Português: credit rating; credit risk; determinants; financial performance; risk management
• Link de acesso: https://dspace.mackenzie.br/handle/10899/33742

This research focuses on investigating the determinants of credit ratings and evaluating their significance as indicators of financial performance for companies listed on the S&P 500. To identify the determinants of credit ratings, the study treats credit ratings as the dependent variable, recognizing their essential role in providing insights into financial risk. The analysis incorporates ten independent variables, which fall into subcategories including leverage, profitability, liquidity, market-related factors, survival indicators, and macroeconomic factors. To further assess the impact of credit ratings on financial performance, the study considers two dependent variables: Return on Assets (ROA) and Tobin's Q (TQ). These variables are studied in relation to credit ratings (CRWLTA), along with a set of independent variables, encompassing Total Debt to Total Assets (TDTA), Total Shareholder Return (TSR), EBITDA Interest coverage (EBITDAICOV), Quick Ratio (QR), Altman's Z-Score (AZS), and macroeconomic factors like GDP growth, Consumer Price Index (CPI) inflation, and the Federal Reserve Interest Rate (FDRI). The empirical analysis is based on data from 2398 observations of 240 companies rated by S&P Global Ratings over the period 2009-2013. The study employs the Generalized Method of Moments (GMM) methodology to estimate the models, chosen for its ability to address potential endogeneity issues in the independent variables. The findings related to the determinants of credit ratings reveal that interest coverage and Altman's Z-score are statistically significant factors, with a significance level of 1%, in explaining variations in credit ratings. This suggests that these two variables have a substantial impact on a company's creditworthiness. Overall, this study offers valuable insights into the factors influencing corporate credit ratings, providing useful information for financial institutions and companies when making informed lending and financing decisions. In terms of examining the impact of credit ratings as indicators of financial performance, the results indicate a negative association with TQ, although statistical significance is not achieved. Additionally, there is a negative relationship with ROA that approaches statistical significance. These findings imply that while credit ratings may not directly influence TQ, they could potentially have implications for a company's profitability.