The Effect Of Family Firm On The Credit Rating: Evidence From Republic Of Korea

Chae, Soo-Joon; Oh, Kwang-Wook

doi:10.19030/jabr.v32i6.9809

Cited by 5 publications

(7 citation statements)

References 22 publications

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“…Similarly, the family ownership (FAMILY) does not influence credit rating. This is in line with Chae and Oh (2016) expectations and Demsetz and Villalonga (2001) results. Indeed, the impact of ownership proportion is closely linked to its definition.…”

Section: Political Connection and Credit Ratingsupporting

confidence: 92%

The effect of political connections and governance on credit ratings: substitution versus complementary view: case of Tunisian firm

Bouaine,

Alaya,

Slim

2023

JAEE

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PurposeThe objective of this paper is to study the impact of political connection and governance on credit rating and whether there is a substitution or complementary relationship between them.Design/methodology/approachIn order to achieve the objective, a succession of eight ordered probit regressions has been carried out. Moderating variables between the political connection and governance characteristics were introduced. The whole population is taken as a sample, i.e., 27 Tunisian companies that are evaluated by FITSH NORTH AFRICA agencies over a period of 10 years (2009–2018).FindingsThe outcomes are mixed. They show that the political connection does not always influence credit rating; the size and board independence always improves credit rating; the duality between the functions affects credit rating; whereas the majorities’ proportion does not influence credit rating; and a substitution between the political connection and the governance characteristics is validated.Research limitations/implicationsLike any other research, our results are factors of our measures and variable choice and depends heavily on the how these variables were conceived. Also, although our number of observations responds to the statistical result generalization requirements, our sample remains relatively narrow with 27 companies only.Practical implicationsIn practice, the research will allow investors to have a better vision upon the future of their investments based on whether to develop their governance system or promote political networking. It will also prompt lenders to look beyond ratings and consider factors such as political connections to make a rational judgment on their future placements.Social implicationsThis study leads us to find various solutions: the establishment of credit agencies that take into consideration all the data of all the operators taken as a whole (bank, leasing company, and factoring). It encourages the reorganization of the Tunisian banking sector through mergers for example.Originality/valueThis study is a pioneer in the credit rating field in Tunisia, where the source of debt financing is the most used by all enterprises across all sectors. This study extends the literature of political connection effectiveness, independent directors, board size, in improving corporate performance and credit rating.

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Section: Political Connection and Credit Ratingsupporting

confidence: 92%

The effect of political connections and governance on credit ratings: substitution versus complementary view: case of Tunisian firm

Bouaine,

Alaya,

Slim

2023

JAEE

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“…Based on the literature [36][37][38][39], the following regression model was used to predict the association between non-financial CER information and future credit ratings.…”

Section: Research Model and Variable Measurementsmentioning

confidence: 99%

Non-Financial Environmental Responsibility Information, Information Environment, and Credit Ratings: Evidence from South Korea

Yoo

2021

Sustainability

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The purpose of this study was to analyze which dimensions of non-financial environmental responsibility information are more reflected in credit ratings. The non-financial environmental responsibility information used in this study was environmental strategy, environmental organization, environmental management, environmental performance, and stakeholder communication. Based on 1085 companies listed on the Korean capital market from 2013 to 2018, this study reports that the more companies engage in environmental responsibility activities, the better their credit ratings are. Specifically, it found that companies with higher environmental performance and stakeholder communication activities received better credit ratings, while higher environmental management and environmental strategy scores had a relatively weak influence. This indicates that among the corporate environmental responsibilities, the more activities requiring relatively little discretion from managers are performed, the more the reputation capital that is accumulated through corporate environmental responsibility (CER) activities, which leads to higher credit ratings. These associations were found to be strengthened in an information environment where there is a higher degree of information asymmetry and the lifecycle of a firm is at a maturity stage.

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“…For example, Craig et al (2008) proves that family-based brand identity causes the lower cost of capital, which is consistent with the results of Sraer and Thesmar (2007), who show that the family firms pay on average lower interest rates on their outstanding debt. Chae and Oh (2016) suggest that family firms are assessing with higher credit ratings and thus the cost of external capital is for them lower.…”

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confidence: 99%

The financial decisions of family businesses

Motylska-Kuźma

2017

JFBM

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Purpose The purpose of this paper is to examine the status, trends and potential future research areas in the field of financial decision-making process in family firms. Design/methodology/approach The bibliometric indicators and methods are applied in order to describe the publication activity and to analyze the contents of the articles. The material examined are the journals included in the SCOPUS, SAGE and EBSCO database and the peer-reviewed article, which contain in their titles, keywords or abstracts with a combination of phrases “family firms,” “family business” or “family enterprise” with “financial decision” or one of the subcategories: capital structure, investment decision, capital budgeting, working capital management or dividend policy. The study covers the period from 2000 to 2016. Findings Although the interest in family business research is growing rapidly, the area of financial decision making is underestimated. Despite of the fact that the vast majority of the studies into financial decisions in family firms is are focused on the capital structure, they do not give clear answers to the question of how the family businesses behave in this scope and what their true financial logic is. Additionally, the area of the investment decisions and dividend policy is rather not better left uncovered. Research limitations/implications The analyses enable the identification of potential avenues for future research which could be vital to make an advancement in the consolidation of the discipline. Practical implications The analyses ought to have a potential meaning mainly for external institutions (especially financial institutions) in better understanding of the family businesses and their point of view. Originality/value This paper fulfills the need of a comprehensive review of financial decision making process in family firms. It provides a literature review and bibliography for the period between 2000 and 2016 for the use of both academicians and practitioners.

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The Effect Of Family Firm On The Credit Rating: Evidence From Republic Of Korea

Abstract: ABSTRACT

Cited by 5 publications

References 22 publications

The effect of political connections and governance on credit ratings: substitution versus complementary view: case of Tunisian firm

The effect of political connections and governance on credit ratings: substitution versus complementary view: case of Tunisian firm

Non-Financial Environmental Responsibility Information, Information Environment, and Credit Ratings: Evidence from South Korea

The financial decisions of family businesses

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