The Impact of Impending Credit Rating Changes on Management Earnings Forecasts

1
Guanming He
Guanming He
1 Durham University

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This study investigates whether impending credit rating changes affect managers’ voluntary financial disclosure behaviors. I find that firms near a credit rating change do not opportunistically alter their financial disclosure practices to manipulate rating agencies’ perceptions about corporate credit risk. In particular, firms close to a credit rating change do not selectively release good news or withhold bad news in their earnings forecasts. Nor do the firms likely issue an optimistically biased forecast or a more precise forecast for good news than for bad news. Overall, there is no evidence suggesting that credit ratings are manipulated via management earnings forecasts.

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Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

Data Availability

Not applicable for this article.

Guanming He. 2018. \u201cThe Impact of Impending Credit Rating Changes on Management Earnings Forecasts\u201d. Global Journal of Management and Business Research - C: Finance GJMBR-C Volume 18 (GJMBR Volume 18 Issue C4): .

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Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

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June 26, 2018

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This study investigates whether impending credit rating changes affect managers’ voluntary financial disclosure behaviors. I find that firms near a credit rating change do not opportunistically alter their financial disclosure practices to manipulate rating agencies’ perceptions about corporate credit risk. In particular, firms close to a credit rating change do not selectively release good news or withhold bad news in their earnings forecasts. Nor do the firms likely issue an optimistically biased forecast or a more precise forecast for good news than for bad news. Overall, there is no evidence suggesting that credit ratings are manipulated via management earnings forecasts.

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The Impact of Impending Credit Rating Changes on Management Earnings Forecasts

Guanming He
Guanming He Durham University

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