The Impact of Credit Rating Information on Disclosure Quality

51 Pages Posted: 12 Jun 2019 Last revised: 9 Sep 2019

See all articles by Yung-Ling Chi

Yung-Ling Chi

National Chung Hsing University

Sean Flynn

Colorado State University - Department of Finance and Real Estate

Date Written: April 17, 2019

Abstract

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

Suggested Citation

Chi, Yung-Ling and Flynn, Sean, The Impact of Credit Rating Information on Disclosure Quality (April 17, 2019). Available at SSRN: https://ssrn.com/abstract=3395533 or http://dx.doi.org/10.2139/ssrn.3395533

Yung-Ling Chi

National Chung Hsing University ( email )

402, No. 250 Kuo Kuang Road, Taiwan
Taichung, Taiwan
China

Sean Flynn (Contact Author)

Colorado State University - Department of Finance and Real Estate ( email )

Fort Collins, CO 80523-1771
United States

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