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This study aims to analyze the determinants of ratings of corporate bonds and sukuk issued by firms listed on the Indonesia Stock Exchange (IDX) for the 2013–2019 period.

This study uses a quantitative approach by testing hypotheses and using logistic regression. Ordinal logistic endogenous (or dependent) variables (Y) in ordinal logistics use data in the form of levels (ordinal scale). Independent (or exogenous) variables (X), include financial and non-financial factors for dependent (or endogenous) variables (Y), namely, of corporate bonds and sukuk ratings. There are two approaches to the study they are Logit and Gompit (Negative Log-Log. The population of the study is Indonesian companies listed on the IDX that issued bonds and sukuk for the 2013–2019 periods. The sampling technique is purposive. In total, 16 corporate companies adhering to the above criteria and issuing bonds and sukuk were chosen. In total, 270 types of bonds and 280 types of sukuk were selected as samples.

The results of the Logit and Gompit regression show that leverage ratio, firm size, security structure and maturity date are important determinants of corporate bond ratings while profitability and liquidity ratios appear to have no influence on the rating. In the case of sukuk, profitability, liquidity and maturity date play important roles in influencing the corporate sukuk rating. However, there is no evidence to suggest that leverage ratio, company size and security structure may affect sukuk ratings.

For both sukuk and bond issuers, it is necessary to pay attention to the factors that may affect the ratings. Specifically, Sukuk issuers need to pay attention to the return of asset, current ratio, growth and structure. On the other hand, bond issuers need to consider depth to equity, structure and maturity. As for investors, the findings of this study reveal that both bond and sukuk ratings reflect their performance.

This study provides useful information for investors that allows them to assess the risk of sukuk or bonds chosen based on rating and financial performance.

The novelty of this study lies in its econometric methodology used to identify factors which influence sukuk and bond ratings. Specifically, this study used two different techniques that allow a robust conclusion to be drawn. Furthermore, this study provides a systematic analysis which allows comparison between factors which affect bond and sukuk ratings in Indonesia.

The purpose of this paper is to examine the impact of sovereign credit ratings on corporations in South Africa by assessing whether the sovereign rating assigned to South Africa by credit rating agencies acts as a ceiling/constraint for credit ratings assigned to corporations that operate within the country. The question of whether sovereign ratings are significant in determining corporate ratings was also explored.

To test the hypothesis regarding the rating of corporates relative to sovereigns, a longitudinal panel design was followed. The analysis employed fixed effects and generalized method of moments techniques.

The main findings are that sovereign ratings both act as a ceiling for corporate ratings and are important determinants of corporate ratings in South Africa. The findings however indicated that company specific variables (accounting variables) are not significant in explaining credit risk ratings assigned to corporates.

This study only looked at the rating activity done by Standard and Poor’s (S&P). A possible further study could explore the hypothesis tested in this research using data from multiple rating agencies and contrast the results across different agencies. Future studies could also look at crisis periods and how the transfer risk discussed in this paper manifests during the transfer period.

The results have implications for the borrowing costs incurred by corporates in South Africa when participating in the international debt market. The implication is that if the sovereign is poorly rated, the corporates may be limited in their ability to secure investor funding at competitive rates from the international financial markets. Thus, should South Africa be downgraded to non-investment grade by S&P, the implications may be that South African corporates on average may suffer the same fate.

Extant literature predominantly utilizes foreign currency ratings. To the extent that this study uses local currency ratings, it adds a new dimension in the body of related studies.

The purpose of this study is to examine how corporate communication of their social programs on their websites affects the ratings of those programs by independent rating agencies. Firms expend resources on corporate social programs (CSPs) to promote their corporate social responsibility and sustainability credentials. Stakeholders, however, often respond to such “self-promotion” with skepticism because they believe that there are inconsistencies between corporate claims and actions. This research draws on attribution theory as a framework to examine how the perceived CSP performance of firms by uncontrollable sources are affected when firms disseminate CSP information on firm websites, i.e. a controllable source, where their claims may not be verifiable.

This study uses a two-step, mixed method study for the analysis using data from Fortune 500 companies. A qualitative content analysis process identifies the interfaces of CSP and their communications on firms’ website. The process allows the authors to collect CSP data systematically from firm websites and to identify relevant variables through the patterns that emerge from the analysis. The findings are used in a quantitative analysis to study how the patterns underlying CSP communication on their websites affect the ratings of firms’ CSP by independent rating agencies.

Results show that the location, the manner, the content and the scope of CSP information dissemination on firm websites, as well as perceived commitment to CSP identified on the website are important drivers of perceived CSP performance. A robustness check using an alternative independent rating of CSP also provides results that are supportive of the findings. In addition, the effects are found to differ by sector of operation, firm age and profitability.

This research suggests that communication of CSPs at controllable sources of firm information dissemination can have a significant effect on the evaluation of CSP at uncontrollable sources when such communication facilitates the assessment of other information from a firm to determine the motive underlying a firm’s CSP.

The findings show that firms and managers can influence the perceived ratings, rankings or scores of their CSP by stakeholders when they put the right information at the right place on their corporate websites. One of the findings shows that even moderate levels of CSP commitment demonstrated on firm websites result in positive perceptions of CSP, which has marked practical implications.

The findings show that integrating even a medium level of commitment to CSP increases the positive perceptions of a firm’s CSP. Thus, society benefits from the firm’s action without a substantial impact on the firm’s profits.

This research shows that firm-controlled sources of CSP information dissemination to stakeholders can affect uncontrollable sources of CSP information evaluation.

This paper aims to investigate the most popular corporate governance rating systems and to scrutinize their usefulness to shareholders and the public at large. It proposes to examine whether the advertised good governance scores reflect corporate performance, fraud, lawsuits, and the like.

The analysis focused on the methodology used by rating agencies to rank corporate governance practices of companies. Analysis of the categories and variables used in the rating systems were also scrutinized and critiqued.

This research shows that there is a weak relationship between corporate performance and corporate governance rating. Ideas and suggestions have been proposes to remedy the shortfalls of existing rating systems.

Many researchers use corporate governance scores in their studies to investigate the relationship between these single scores and corporate performance. Potential vulnerability and risk are demonstrated using such kind of methodologies. Research should be accomplished with the corporate governance indicators separately.

Several corporate governance ratings systems have been developed and implemented. These systems reduce a complex corporate governance process and related performance into a single score. Such outcome does not in any way reflect the real nature of corporate governance or its performance. Ranking, if it is at all needed, should be interpreted carefully and not be used as a simple measurement of good or bad corporate governance practice.

This paper is the first of its kind to critically evaluate corporate governance systems scores launched by different rating agencies.

Both consumer and corporate credit ratings agencies played a major role in the US subprime mortgage crisis. Equifax, Experian, and TransUnion deployed a formalized scoring system to assess individuals in mortgage origination, mortgage pools then were assessed for securitization by Moody's, S&P, and Fitch relying on expert judgment aided by formal models. What can we learn about the limits of formalization from the crisis? We discuss five problems responsible for the rating failures – reactivity, endogeneity, learning, correlated outcomes, and conflict of interest – and compare the way consumer and corporate rating agencies tackled these difficulties. We conclude with some policy lessons.

This article discusses credit migration of diversified loan pool securitizations, as evidenced by the ratings transitions of mortgage‐backed securities (MBS) and asset‐backed securities (ABS). The authors contrast the ratings (i.e., credit) stability of MBS and ABS relative to ratings migration of general obligation corporate credit. They also use holding period returns to compare the total return portfolios of MBS/ABS to portfolios of senior unsecured corporate obligations.

This study aims to provide further insights into the connection between corporate social responsibility (CSR) and companies’ credit ratings, while also exploring the role of corporate governance as a moderating factor. The hypotheses for this relationship are rooted in both legitimacy and stakeholder theories.

Using a sample of French non-financial listed firms from 2007 to 2020, this paper uses the ordered probit model introduced by Greene (2000). The issue of endogeneity has also been addressed.

The study reveals that CSR practices positively impact companies’ credit ratings by enhancing solvency and financial performance. Specifically, firms that prioritize CSR, particularly in the social and environmental dimensions (such as community relations, diversity, employee relations, environmental performance and product characteristics), tend to have higher credit ratings and a reduced risk of default. This suggests that credit rating agencies likely incorporate CSR performance when assigning credit ratings. Furthermore, the quality of corporate governance acts as a moderator, strengthening the relationship between CSR and credit ratings. The findings remain robust even after accounting for key firm attributes and addressing potential endogeneity between CSR and credit ratings.

This research provides valuable guidance for policymakers, corporate managers, investors and other stakeholders, as it offers insights into the influence of CSR activities on risk premiums and financing costs. For financial institutions, expanding credit decisions to encompass non-financial factors such as CSR can result in more accurate predictions of firm credit quality compared to relying solely on financial indicators.

To the best of the authors’ knowledge, this study stands out as the first to systematically examine the relationship between CSR and credit ratings within the French context. Moreover, it distinguishes itself by investigating the moderating influence of corporate governance on this relationship, setting it apart from prior research.

Using a sample of listed Chinese companies that issued bonds from 2010 to 2019, the authors empirically test the link between CSR and corporate bond pricing, and the mechanism and channels behind this link.

This study systematically examines whether and how corporate social responsibility (CSR) affects the corporate bond market in China.

Firms with better CSR have higher corporate bond credit ratings and lower corporate bond yield spreads. These associations remain stable in robustness checks, including checks that use regional typhoon disaster as an instrumental variable. The effects of CSR are more significant for firms with a worse information environment and for those operating in high-risk environments. Better CSR is associated with less earnings management, fewer financial restatements and less analyst forecast divergence. In addition, the effects of CSR are more pronounced after the 2013 market-oriented reform and when issuers are non-state-owned enterprises.

Because market participants can incorporate firms' CSR into their decision-making, establishing an effective channel for communicating CSR between issuers and market participants will enhance the effects of CSR.

Researchers need to attend to the mechanisms behind the link between CSR and corporate bond pricing, and to the characteristics of strong environmental contingency in emerging markets, specifically the periods and scenarios in which the effects of CSR change.

This study provides systemic evidence that CSR benefits corporate bond pricing through both informational and reputational channels and that the effects of CSR vary by time and firm. These findings enrich the literatures on both the economic consequences of CSR and the determinants of corporate bond pricing, and provide a plausible explanation for mixed findings on the effects of CSR in previous studies.

The question is whether debt market investors see through managers' attempts to hide their pension obligations. The authors establish a robust relation between understated pension liabilities and corporate bond yield spreads after controlling for factors that have been previously identified as having a significant impact on firms' cost of borrowing. The results support the idea that bond market investors are not being misled by the use of high pension liability discount rates by some companies to lower their reported pension obligations. For a small fraction of debt issuers, the reported pension liabilities are larger than the pension liabilities valued at the stipulated interest rate benchmarks. For these issuers with overstated pension liabilities, bond investors adjust their borrowing costs downward.

The authors investigate the relation between corporate bond yield spreads and understated pension liabilities relative to long-term Treasury and high-grade corporate bond yields. They aim to answer two questions. First, what are the sizes of over or understated pension liabilities relative to guideline benchmarks? Second, do debt market investors see through the potential management manipulation of pension discount rates? The authors find that firms with large understated pension liabilities face higher marginal borrowing costs after taking into account issue-specific features, firm characteristics, macroeconomic conditions and other pension information such as funded status and mandatory contributions.

The average understated projected benefit obligations (PBOs) are understated by $394.3 and $335.6, equivalent to 3.5 and 3.0% of the beginning of the fiscal year market value, respectively. The average understated accumulated benefit obligations (ABOs) are understated by $359.3 and $305.3 million, equivalent to 3.1 and 2.6%, of the beginning of the fiscal year market value, respectively. Relative to AA-grade corporate bond yields, the average difference between firm pension discount rates and benchmark yields becomes much smaller; the percentage of firm pension discount rates higher than benchmark yields is also much smaller. As a result, understated pension liabilities become negligible. The authors establish a robust relation between corporate bond yield spreads and measures of understated pension liabilities after controlling for issue-specific features, firm characteristics, other pension information (funded status and mandatory contributions), macroeconomic conditions, calendar effects and industry effects.

S&P Rating Services recognizes the issue that there is considerably more variability in discount rate assumptions among companies than in workforce demographics or the interest rate environment in which firms operate (Standard and Poor's, 2006). S&P also indicates that it would be desirable to normalize different discount rate assumptions but acknowledges that it is difficult to do so. In practice, S&P Rating Services conducts periodic surveys to see whether firms' assumed discount rates conform to the normal standard. The paper makes an initial attempt to quantify the size of understated pension liabilities and their impact on corporate bond yield spreads. This approach can be extended to study firms' costs of equity capital, the pricing of seasoned equity offerings and the pricing of merger and acquisition transaction deals, among other questions.

The purpose of this paper is to assess the association between country-level corporate governance and earnings management (EM). It aims to investigate whether the Governance Metrics International (GMI; acquired by Morgan Stanley Capital International in 2014) rating for national corporate governance on a country level is a significant explanatory variable for the country-level EM score or otherwise.

In a sample of 280 country-year observations during the period from 2000 to 2009, the paper measures national corporate governance quality using GMI ratings scores and whether the corporate governance model is Anglo Saxon or otherwise.

The findings of this study show that corporate governance is a significant indicator of lower EM levels in a country.

Corporate governance rating firms play a vital role in public markets. GMI provides country-level corporate governance ratings to assess the quality of corporate governance in several countries. The findings of this study show preliminary evidence that GMI ratings of corporate governance provide good guidance to investors on the quality of corporate governance in a country.

This paper is the first empirical attempt to examine the association between country-level corporate governance, GMI ratings for country-level corporate governance and EM.