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Insiders' stock pledging disclosures and credit ratings: Evidence from India

Amanjot Singh and Harminder Singh

Pacific-Basin Finance Journal, 2022, vol. 75, issue C

Abstract: We examine the impact of insiders' stock pledging disclosures on credit ratings of different debt instruments in India. The rating agencies extend a negative response in the form of low credit ratings for pledging firms compared to non-pledging firms - irrespective of any particular debt choice (private versus public) and debt maturity (short-term versus long-term). Insider stock pledging increases the likelihood of credit rating downgrade and the rating-watch status. It contains information about pledging firms' debt-servicing capacity and adversely affects credit ratings for firms with higher information asymmetry. Our findings also support an increase in the cost of debt for pledging firms.

Keywords: Credit ratings; Insiders; Stock pledging; India (search for similar items in EconPapers)
JEL-codes: G24 G32 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:75:y:2022:i:c:s0927538x2200124x

DOI: 10.1016/j.pacfin.2022.101829

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Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

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