The Impact of Impending Credit Rating Changes on Management Earnings Forecasts
Keywords:
credit ratings; management earnings forecasts; forecast news; forecast accuracy; forecast precision
Abstract
This study investigates whether impending credit rating changes affect managers#x2019; voluntary financial disclosure behaviors. I find that firms near a credit rating change do not opportunistically alter their financial disclosure practices to manipulate rating agencies#x2019; perceptions of corporate credit risk. In particular, firms close to a credit rating change do not selectively release good news or withhold bad news on their earnings information. Nor do the firms likely issue an optimistically biased forecast or a more precise forecast for good news than for bad news. Overall, there is no evidence suggesting that credit ratings are manipulated via management earnings forecasts.
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Published
2018-03-15
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This work is licensed under a Creative Commons Attribution 4.0 International License.