Does market risk predict credit risk? An analysis of firm risk sensitivity, evidence from South Korea

LIM, Hyoung-joo and MALI, Dafydd (2018). Does market risk predict credit risk? An analysis of firm risk sensitivity, evidence from South Korea. Asia-Pacific Journal of Accounting & Economics, 25 (1-2), 235-252.

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Official URL: https://www.tandfonline.com/doi/full/10.1080/16081...
Link to published version:: https://doi.org/10.1080/16081625.2016.1268060
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    Abstract

    We empirically test the relation between stock volatility (market risk) and credit ratings (credit risk) using KRX listed firms. We find a negative relation between stock volatility and credit ratings. The results suggest that as stock price volatility increases, a firm is more likely to experience a credit rating decrease. After dividing our sample into investment and non-investment grade groups, we find the relation between volatility and a credit rating decrease diminishes in the investment grade sample compared to the non-investment grade sample. Overall, we find investment grade firms are more likely to absorb shocks associated with speculative investment/divestment compared to price sensitive non-investment grade firms.

    Item Type: Article
    Identification Number: https://doi.org/10.1080/16081625.2016.1268060
    Page Range: 235-252
    Depositing User: Dafydd Mali
    Date Deposited: 10 Jul 2018 11:46
    Last Modified: 10 Jul 2018 11:46
    URI: http://shura.shu.ac.uk/id/eprint/21882

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