Credit rating process: A distinction between family and non-family firms regarding their rating score

Abstract

Purpose

The purpose of this paper is to analyze which key financial factors are appropriate for measuring a credit rating score for family firms. In the recent literature, there exists a vast number of studies which evaluates performance differences between family and non-family firms (NFF). However an analysis with regards to a distinction between credit rating scores of family-orientated businesses compared to their counterparts in Austria has not been examined so far.

Design/methodology/approach

In order to bridge this research gap, an empirical model based on Moody’s credit rating methodology is used to address these issues. Therefore, the relevant data were taken from the 600 largest, both listed and non-listed, companies of Austria. The statistical measurements refer to a comparison of the means resulting from quantitative rating categories (profitability, leverage structure, liquidity development and firm size).

Findings

The results of this empirical research show that family firms achieve better values in profitability, leverage structure and liquidity development based on credit rating scores. Only firm size represents no significant differences between family and NFF.

Originality/value

This study will contribute to the existing literature in the academic area of family business research and offers a framework for future empirical analysis in this field. Furthermore, this paper provides important information that will help both family and NFF accomplish their financial strategies related to credit rating transitions.

Citation

Wiener-Fererhofer, A. (2017), "Credit rating process: A distinction between family and non-family firms regarding their rating score", Journal of Family Business Management, Vol. 7 No. 3, pp. 256-290. https://doi.org/10.1108/JFBM-06-2017-0013