ScholarWorks@숙명여자대학교

초록

The difference between AR and BIR can have an useful information on the possibility of credit rating changes and affects the firm’s debt financing. In this paper, we analyze the relationship between the firm’s debt financing and the difference between two ratings. Management can decrease debt financing when the difference is enlarged, reflecting the possibility of credit rating changes (CR-CS hypothesis, Kisgen, 2006). On the other hand, management can increase debt financing, using the current asymmetric information held by the management (market timing hypothesis). Major results of this paper are as follows; Firstly, it shows that BIR in the Korean market leads the change of AR. Secondly, when the rating is expected to downgrade and that the degree of the downgrade is high, firms reduce their current debt financing to prevent the downgrade. This paper is the first study to examine the relationship between the possibility of credit rating changes and debt financing by using the difference between BIR and AR.

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