Does firm visibility matter to debtholders? Evidence from credit ratings

Yamin Hao and Shuo Li

Advances in accounting, 2021, vol. 52, issue C

Abstract: This paper investigates the role of a firm's information visibility in the assessment of its default risk. We use press coverage to proxy for firm visibility and find that highly visible firms generally have better credit ratings. The positive association between firm visibility and credit ratings arises because (1) press coverage facilitates the generation and dissemination of firm-specific information to market participants and (2) it disciplines the activities of managers and large shareholders. This positive association becomes stronger for firms with more severe information asymmetry or weaker alternative monitoring systems. Our findings contribute to the accounting literature by providing new evidence on the influence of firm visibility in the debt market.

Keywords: Agency theory; Credit ratings; Default risk; Firm visibility; Press coverage (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:advacc:v:52:y:2021:i:c:s0882611021000031

DOI: 10.1016/j.adiac.2021.100515

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