The Impact of Value Creation (Tobin’s Q), Total Shareholder Return (TSR), and Survival (Altman’s Z) on Credit Ratings

Nazário Augusto de Oliveira () and Leonardo Fernando Cruz Basso
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Nazário Augusto de Oliveira: Department of Business Administration—Strategic Finance, Mackenzie Presbyterian University (UPM), São Paulo 01302-907, Brazil
Leonardo Fernando Cruz Basso: Department of Business Administration—Strategic Finance, Mackenzie Presbyterian University (UPM), São Paulo 01302-907, Brazil

IJFS, 2024, vol. 12, issue 2, 1-17

Abstract: This research explores the impact of financial indicators on the credit ratings of companies listed on the S&P 500, employing a Sys-GMM model to address endogeneity concerns. Three independent variables categorized as market and survival factors alongside seven control variables sourced from leverage, liquidity, interest coverage, profitability, market, survival, and macroeconomic domains were investigated. The sample consisted of 2398 observations from Capital IQ Pro, spanning nine years (2013 to 2021) and encompassing 240 public companies. The findings suggest that neither Tobin’s Q (TQ) nor Total Shareholder Return (TSR) lack significant correlations with credit ratings, implying that stock market performance and total shareholder return do not directly impact credit ratings. In contrast, the Altman Z-score (AZS) emerged as a significant predictor, indicating its importance in assessing credit risk. These insights enhance the understanding of financial indicators’ impacts on credit ratings, aiding financial institutions and companies in prudent lending and financing decisions.

Keywords: credit rating; credit risk; determinants; risk management (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2024
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