Determinants and Impacts of Internal Credit Rating

Alkhawaldeh, Abdullah A. K.

doi:10.5430/ijfr.v4n1p120

Cited by 3 publications

(3 citation statements)

References 36 publications

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“…Al‐khawaldeh (2013) evaluated the impact of the firm characteristic factors upon the credit rating of Jordanian firms. The study concluded profitability to be positively associated with credit rating, and leverage and loss propensity to be negatively related to credit ratings.…”

Section: Review Of Literature and Theoretical Framework Of The Studymentioning

confidence: 99%

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Financial determinants of corporate credit ratings: An Indian evidence

Gupta

2021

Int. J Fin Econ

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Credit rating is a vital tool in the hands of investors and other users. Standard mathematical formulas do not exist for determining credit ratings. Instead, rating agencies exercise their judgment and use their experience to determine what information is to be important in providing a rating. Thus, knowledge and understanding about factors influencing credit ratings is very crucial for companies being rated and other users. Most of the prior studies in related context have used developed countries' data, and the effect in emerging markets, especially in Indian context, is still unclear due to lack of such studies. So, this study attempts to identify the long-term and short-term financial determinants of credit ratings issued to Indian companies and examines their impact on credit ratings on the basis of panel data and cross-sectional approaches. Ordered probit analysis is used with credit ratings as the dependent variable and six financial factors as the independent variables. Results indicate that size, profitability and leverage have a significant relationship with corporate credit ratings in both panel data and cross-sectional approaches. Also, size has the highest impact on credit ratings followed by leverage and profitability in both the approaches. The major contribution of present study is that two different mathematical models are framed which have a reasonably well correct prediction percentage. These models can be used by the investors' academicians, practitioners and other users for predicting the rating categories of various companies and to get a fair idea about their creditworthiness and safety.

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Section: Review Of Literature and Theoretical Framework Of The Studymentioning

confidence: 99%

“…Again, it is well established that higher growth improves firm value as it provides good prospects for future cash flows (Chadha & Sharma, 2016). Thus, growth is expected to have a positive relationship with credit ratings (Adams et al, 2003; Al‐khawaldeh, 2013).…”

Section: Review Of Literature and Theoretical Framework Of The Studymentioning

confidence: 99%

Financial determinants of corporate credit ratings: An Indian evidence

Gupta

2021

Int. J Fin Econ

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“…Sedangkan jika ditinjau dari sisi investor, investasi dalam bentuk obligasi merupakan alternatif yang aman dibandingkan dengan investasi saham. [11] , Sari dan Badjra (2016) [12] , Arisanti et al (2014) [3] , Mahfudhoh dan Cahyonowati (2014) [7] , Widiyastuti dan Khusniyah (2014) [17] , Prabowo dan Sutjipto ( 2012) [9] , Alkhawaldeh (2012) [2] , Pandutama (2012) [8] , Sejati (2010) [13] , Adams dan Burton (2000) [1] . Faktor [6] rasio likuiditas atau sering juga disebut dengan nama rasio modal kerja merupakan rasio yang digunakan untuk mengukur seberapa likuidnya suatu perusahaan dengan cara membandingkan komponen yang ada di neraca, yaitu total aktiva lancar dengan total passiva lancar (utang jangka pendek).…”

Section: Pendahuluanunclassified

Pengaruh Likuiditas, Leverage Dan Pertumbuhan Perusahaan Terhadap Peringkat Obligasi

Azani¹,

Khairunnisa²

2019

JAF

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Bond rating is a risk scale which can illustrate the ability of a company in fulfilling its obligation to pay interest or pay off principal. The higher the bond rating, the more a company is considered able to fulfill its obligation punctually. Conversely, the lower the bond rating, the higher the risk of failure to pay. This study was aimed to determine factors influencing bond rate. The research variables were liquidity, leverage and company growth. The research object was bonds published by non-financial and non-banking companies rated by PT. PEFINDO in 2011-2015. The sampling technique was purposive sampling, which collected 105 bonds published by 7 companies. The data analysis model in this study was logistic regression analysis using SPSS 21 sofware. The research result showed that variables liquidity and leverage had significant positive influence on bond rating while company growth had significant negative influence on bond rating

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Are Bankruptcy Prediction Models Effective for Predicting Ratings? An Empirical Investigation of Altman’s Model in Indian Corporate Sector

Singh,

Singla

2023

Vision: The Journal of Business Perspective

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The alternative method for predicting credit ratings by employing bankruptcy prediction models is the main subject of the present article. Rating agencies utilize an extremely intricate rating methodology, which differs from agency to agency, and the ratings given by agencies are less reliable in anticipating short-term defaults and react slowly to credit events, as demonstrated by the failure of agencies during the crisis of 2008. Both credit rating assignment and bankruptcy prediction focused on the probability of default, but the methodology used by the two varies significantly: corporate bankruptcy prediction models predict the future default probability of a company as a whole, whereas credit rating only access the default risk associated with a specific instrument. Therefore, it is preferable to employ bankruptcy prediction algorithms to access a company’s future ratings. The present study used Altman’s framework in order to assess whether bankruptcy prediction models can be applied to access a company’s future ratings in advance or not and found that it can be used as an alternative method to predict the future credit ratings, which can be used by investors and banks to make better investment and lending decisions.

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Determinants and Impacts of Internal Credit Rating

Cited by 3 publications

References 36 publications

Financial determinants of corporate credit ratings: An Indian evidence

Financial determinants of corporate credit ratings: An Indian evidence

Pengaruh Likuiditas, Leverage Dan Pertumbuhan Perusahaan Terhadap Peringkat Obligasi

Are Bankruptcy Prediction Models Effective for Predicting Ratings? An Empirical Investigation of Altman’s Model in Indian Corporate Sector

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