Does corporate ownership affect credit risk? An investment grade vs non-investment grade firm analysis - evidence from South Korea

MALI, Dafydd and LIM, Hyoungjoo (2016). Does corporate ownership affect credit risk? An investment grade vs non-investment grade firm analysis - evidence from South Korea. Corporate Ownership and Control, 13 (4), 38-49.

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Official URL: https://www.virtusinterpress.org/DOES-CORPORATE-OW...

Abstract

A credit rating indicates a firm’s risk of financial default. Using 1) controlling shareholders’ ownership and 2) foreign investors’ ownership as proxies for corporate governance, we investigate whether corporate ownership structure influences a credit rating agencies’ perception of risk. Using a sample of 1,213 KRX firm-year observations, and a t+1 approach, we find that firms with higher foreign ownership have higher credit ratings compared to those with lower foreign ownership. Moreover, we find that higher percentage of shareholder ownership does not affect credit ratings for our initial sample; however, after dividing our sample into investment/non-investment grade samples, we find a positive/negative relation for investment/non-investment firms. The results suggest credit rating agencies perceive the relation between corporate ownership and default risk differently for investment/non-investment grade firms.

Item Type: Article
Identification Number: https://doi.org/10.22495/cocv13i4p4
Depositing User: Dafydd Mali
Date Deposited: 26 Jul 2018 13:00
Last Modified: 26 Jul 2018 13:01
URI: http://shura.shu.ac.uk/id/eprint/21941

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