The effect of corporate governance on firm's credit ratings: Further evidence using governance score in the United States

Document Type

Article

Publication Date

6-1-2012

Abstract

We investigate whether corporate governance affects firms' credit ratings and whether improvement in corporate governance standards is associated with improvement in investment grade rating. We use the Gov-score of Brown and Caylor (2006), the Gomper's G index and an entrenchment score of Bebchuk (2009) to proxy for corporate governance. Using a sample of US firms, we find that firms characterized by stronger corporate governance have a significantly higher credit rating, and that this association is accentuated for smaller firms relative to larger firms. We find that an improvement in corporate governance is associated with improvement in bond rating. © 2011 The Authors. Accounting and Finance © 2011 AFAANZ.

Identifier

84859964376 (Scopus)

Publication Title

Accounting and Finance

External Full Text Location

https://doi.org/10.1111/j.1467-629X.2010.00396.x

e-ISSN

1467629X

ISSN

08105391

First Page

291

Last Page

312

Issue

2

Volume

52

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