earticle

영어

This paper analyzes the information value of a credit watchlist in the Korean credit rating market. Credit rating agencies issue credit watches to indicate the direction of ratings changes within a short time horizon of three months on average. Credit watches are marked as either up, down, or uncertain. A watch is usually triggered by discrete corporate events such as mergers, acquisitions, restructuring, and announcements of plans expected to affect credit quality, or by trends in the issuer’s operations or financial weaknesses such as financial performance, liquidity and leverage, and accounting fraud. The watchlist either improves the information-certification role of credit ratings (delivering information), or allows rating agencies to influence the risky choices of issuing firms by threatening them with imminent rating downgrades and subsequent investor reactions (implicit contract). This study tests these two different explanatory lines to determine the information value of the credit watchlist. This study also identifies the features of firms with rating changes that are preceded by credit watches, and the factors affecting the agreement between a credit watch and subsequent rating changes. In addition, it examines whether the market reaction to rating changes depends on whether it is preceded by a negative credit watch. It is observed that there is a greater proportion of credit watches marked as “down” in Korea than in the US, and that the credit watchlist has been operated quite conservatively. Using the Nice’s credit rating and watchlist data from 2000 to 2014, the results support the delivery of information argument more than the implicit contract argument. Most of the variables that represent delivery of information, such as size, fixed assets, and BBB rating, are statistically significant, whereas the only significant variable associated with an implicit contract is cash ratio. However, the watchlist by provisional evaluation and simultaneous announcement with rating change presents a role of the implicit contract as well as the delivering information A negative watchlist followed by a downgrade is more likely to occur with larger issuers, greater rating changes, and lower credit ratings. Moreover, the extent to which the direction of credit watches coincides with the direction of subsequent rating changes is greater when there is a shorter duration between the watchlist and the rating change, periodical evaluation, and lower credit ratings. In terms of market reactions to downgrades, the negative watch-proceeded downgrades rather than the direct downgrades exhibit greater negative cumulative abnormal returns, which deepen in investment grade, provisional evaluation, and simultaneous announcement of watchlist and rating change. Meanwhile, the issuing firm’s cumulative abnormal return is statistically significantly negative when a negative watchlist is issued, but insignificantly positive when a positive watchlist is issued. Therefore, the information value of the credit watchlist can be summarized as follows. First, the watchlist in the Korean credit rating market generally fulfills the delivery of information rather than the implicit contract role. Analysis of the characteristics of firms that are issued with a negative watchlist indicates that the proxies measuring the delivery of information, such as size, fixed assets, and BBB of credit rating, are statistically significant. The role of the implicit contract is also partly observed in that the downgrades are actually executed in less than seventy percent of the issued negative watchlist cases. Furthermore, the credit watches by provisional evaluation and simultaneous announcement with rating change are also observed to present the implicit contract role. Second, the watchlist provides more information about issuers with investment credit ratings than speculative credit ratings. There is a greater deterioration in negative cumulative abnormal returns for investment than for speculative grades when a negative credit watch is issued. This phenomenon also appears when the downgrade is subsequent to a negative credit watch. The watchlist is less likely to be issued to speculative or default credit ratings. Third, the watchlist together with rating changes magnifies a negative market reaction in Korea, which is inconsistent with the results for the US market due to the unique timing of announcements, as the watchlist tends to be issued simultaneously with rating changes. This study makes three contributions to the literature. First, it is the first study to document the watchlist in the Korean credit rating market. Most studies have examined market reactions with respect to rating changes. The findings will be useful for academics and practitioners. Second, the study comprehensively investigates the role of the watchlist in Korea and discloses the genuine economic function of the delivery of information. Finally, the paper suggests policy implications for encouraging more issuance of speculative grades, separation from grade changes, and periodic evaluations.

한국어

본 연구는 신용 등급감시(credit watch)의 정보적 가치에 대해 분석한다. 즉 등급감시가 국내에서는 정보 전달(delivering information)과 암묵적 계약(implicit contract) 중 어느 기능을 주로 수행하는가를 알아본다. 또한 등급변경 이전에 등급감시가 선행되는 기업의 특성 및 등급감시와 등급변경의 일치성에 영향을 주는 요인들을 도출한다. 이와 함께 등급하락 시 부정적 등급감시 선행 여부에 따른 시장반응의 차이도 살펴본다. 실증분석 결과 국내의 경우 긍정적 보다는 부정적 등급감시 의견이 많았으며 등급감시가 보수적으로 운영되고 있는 것으로 나타났다. 등급감시의 정보적 가치와 관련해서 국내에서는 암묵적 계약 보다 정보전달 기능을 주로 수행하고 있는 것으로 밝혀졌다. 즉 기업규모, 고정자산 비율, BBB 여부 등 정보전달 기능을 나타내는 대부분의 변수는 유의함을 보인반면 암묵적 계약을 나타내는 변수 중에서는 현금비율만이 유의성을 보였다. 하지만 평가 시기나 등재시기에 따라 등급감시의 역할이 상이, 수시평정과 등급변경 동시등재의 경우는 정보전달과 함께 암묵적 계약 기능도 수행하는 것으로 나타났다. 또한 기업규모가 클수록, 등급변동 폭이 클수록, 신용등급이 낮을수록 등급 하락 이전에 부정적 등급감시가 선행되었고 등급감시기간이 짧을수록, 정기평정일 수록, 신용도가 낮을수록 등급감시와 등급변경의 방향성이 일치하였다. 이와 함께 등급감시 등재가 선행된 등급하락의 경우 직접 등급하락 시보다 음(-)의 누적초과 수익률이 더 큰 것으로 나타났다. 또한 투자등급, 수시평정, 등급변경과 동시에 진행한 등급감시의 경우 더 큰 규모의 음(-)의 누적초과수익률을 기록했다.