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Full-Text Articles in Finance and Financial Management
Director Networks And Credit Ratings, Bradley W. Benson, Subramanian R. Iyer, Kristopher Kemper, Jing Zhao
Director Networks And Credit Ratings, Bradley W. Benson, Subramanian R. Iyer, Kristopher Kemper, Jing Zhao
Business Faculty Publications and Presentations
We explore the effect of director social capital, directors with large and influential networks, on credit ratings. Using a sample of 11,172 firm‐year observations from 1999 to 2011, we find that larger board networks are associated with higher credit ratings than both firm financial data and probabilities of default predict. Near‐investment grade firms improve their forward‐looking ratings when their board is more connected. Last, we find that larger director networks are more beneficial during recessions, and times of increased financial uncertainty. Our results are robust to controls for endogeneity. Tests confirm that causality runs from connected boards to credit ratings.
Corporate Litigation And Debt, Matteo P. Arena
Corporate Litigation And Debt, Matteo P. Arena
Finance Faculty Research and Publications
This study examines the effect of litigation risk and litigation costs on firms’ credit ratings and debt financing. The results show that litigation affects a firm's creditworthiness and debt costs in two stages. Before a lawsuit filing, firms at higher risk of litigation have lower credit ratings, are more likely to be rated speculative grade, pay higher yields on loans and bonds, and are less likely to rely on debt financing. At the time of the lawsuit resolution, settlement costs have an additional effect on firm credit quality. Companies facing larger settlement disbursements in relation to their available cash experience …