The Impact of Credit Rating Information on Disclosure Quality
51 Pages Posted: 12 Jun 2019 Last revised: 9 Sep 2019
Date Written: April 17, 2019
Do credit ratings affect the information content of corporate disclosure? Using novel data on rating analysts to obtain exogenous variation in rating information, we find that greater uncertainty in credit ratings increases the quality of information disclosed by the firm. This is consistent with the firm attempting to reduce overall uncertainty about value by improving the quality of its own disclosure. Our results are consistent with theories in which improvements in one type of information can crowd out other types, and they suggest that policies aimed at improving rating accuracy may in fact reduce the quality of corporate disclosure.
Keywords: credit ratings, public disclosure, information quality
JEL Classification: G2, G24, G3, G39, M4, M41
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