Business Commons^™

Credit Ratings And Firm Litigation Risk, Huixian Xie

CMC Senior Theses

This paper looks at whether firms’ credit ratings are negatively affected by litigation risk after controlling for known factors that affect credit ratings. The conventional wisdom is that litigation risk and credit ratings have an inverse relationship. However, my hypothesis is that the inverse relationship will not be stable if the model of credit ratings has taken other factors into account. The methodology first constructs a model of litigation risk, and then regress the credit ratings on the measurement of litigation risk. Previous empirical research on litigation risk measurement uses industry proxies as indicators for litigation risk. In this paper, …