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영어

We examine whether there is a relationship between conditional conservatism and credit ratings. Credit rating levels are the ‘opinion‘ of credit rating agencies about a firm’s default risk based on financial statements data and corporate governance information. In South Korea, credit rating levels are issued by National Information & Credit Evaluation (NICE), Korea Investor Services (KIS), Korea Ratings (KR) and Seoul Credit Rating & Information (SCI), and are used by bond investors, debt issuers, and governmental officials for decision making and legislative purposes. Accounting practices such as conditional conservatism have the potential to signal low default risk and financial stability. Accounting conservatism reflects a manager’s tendency to recognize “bad news” in a timelier manner than “good news” (Basu, 1997). The academic community continues to debate the merits of conservatism. However, the majority of studies suggest that conditional conservatism is an accounting practice with the potential to increase accounting quality (Watts, 2003; Roychowdhury and Watts, 2007; Ball and Kothari, 2008). In the U. S., numerous studies find an association between level of conservatism and credit ratings (Ahmed et al., 2002; Moerman (2006); Nikolaev (2007); Bauwhede (2007): Zhang, 2008; Peek 2010). Therefore, in the U.S., there is evidence to suggest that credit ratings agencies care about conditional conservatism as an accounting practice with the potential to influence default risk. In South Korea, there is evidence of a positive relation between accounting conservatism levels and credit ratings (Park et al., 2011). However, the association between credit rating changes and financial conservatism is a question left unanswered. Our motivation is to address this caveat. To our knowledge, our study is the first to analyze the association between conditional conservatism and credit ratings and credit rating changes using the two most popular conditional conservatism measures. We contribute to the literature by providing an evidence that conditional conservatism may influence a credit rating agency’s perception of default risk. We examine if conditional conservatism is associated with credit ratings based on the following; conditional conservatism is an accounting practice associated with reducing a manager‘s ability to 'inflate' net income; hence, constraining dividend has the potential to reduce a credit rating agency’s perception of risk. Credit rating agencies issue higher credit ratings to firms with lower default risk. Thus, because firms care deeply about maintaining or increasing their credit ratings, conservative reporting should have a positive a relation with credit rating levels / credit ratings changes. We perform numerous tests to establish the relation between conditional conservatism and credit ratings / credit rating changes. We investigate the relationship between a firm's credit ratings / credit ratings changes and conditional conservatism using a KRX firm sample of 1,310 firm-years from 2002 to 2013. First, we establish the levels of conditional conservatism using the accruals based Ball and Shivakumar (2005) and the market based Basu (1997) models. The results suggest that firms borrow equity in the form of public debt are conservative, consistent with previous studies. Next, we use a dummy variable approach to examine the relationship between conservatism and credit ratings for investment / non-investment grade firms. We find that investment and non-investment grade firms have statistically insignificantly different levels of financial conservatism. Thirdly, we test if conditional conservatism has a statistically significant relation with credit rating changes. We find that firms that experience an increase or a decrease in their credit rating levels from period t to t+1 are marginally more conservative compared to firms with consistent credit rating levels. Next, we test the relation between conditional conservatism and credit rating increases. Firms with higher levels of conservatism may benefit from a credit rating increase because an increase in conservatism indicates lower risk. We use a dummy variable approach to capture if conservatism in period t has the potential to influence a credit rating period in t+1. We do not find a statistically significant relation between conservatism and credit ratings for our entire sample. However, we find that there is a positive relation between conservatism in period t and a credit rating increase in period t+1 for investment grade firms. Credit ratings have significant implications for a firm’s access to capital. Firms below the investment grade level (BBB+ and below) are expected to face higher capital costs and face limited access to investor equity because of legislative restrictions compared to firms with investment grade bonds (A- to AAA). Credit ratings agencies may reward financially conservative firms above the investment grade threshold with a credit rating’s increase because conditional conservatism is considered an important risk metric for firms above the investment grade. Other metrics may be more critical to firms below the investment grade cut-off. Finally, we perform robustness checks for our main hypothesis. We find that firms that experience a credit rating increase in period t+1 have statistically significantly higher levels of conservatism in period t compared to firms experience a credit rating decrease or remain constant in period t+1, supporting our previous findings. Taken together, our results suggest that credit ratings agencies consider conditional conservatism when issuing credit ratings. Firms with higher credit ratings are generally more conservative. Moreover, conditionally conservative firms above the investment grade threshold can be rewarded with a credit rating increase.

한국어

본 연구는 보수주의적 재무보고가 차기 신용등급에 미치는 영향을 검증하는 것을 목적으로 한다. 1997년 외환위기 이후 신용등급은 투자자에 있어 매우 중요한 지표로 인지되어 왔고 기업들은 이를 유지하거나 상향 조정시키기 위하여 많은 노력을 투입하는 것으로 알려져 있다. 한편 재무보고에 있어 보수주의는 이익의 질을 향상 시키는 오랜 관습으로 인식되어 왔으며(Watts, 2003), 손실을 이익보다 더 적시에 인식함으로써 보다 신뢰할 수 있는 이익 정보의 제공을 돕는 역할을 하는 것으로 알려져 있다. 보수주의적 재무보고는 주주들에게 배분될 수 있는 이익잉여금을 낮게 보고 하도록 유도하기 때문에 기업들은 보다 많은 실제 이익을 기업에 유보할 수 있고 결과적으로 이는 채무불이행 위험(default risk)을 낮추는 역할을 할 수 있다. 따라서 신용평가기관이 만약 기업의 보수주의적 재무보고를 인지한다면 높은 신용등급을 부여할 가능성이 높다. 본 연구는 2002년부터 2013년까지 국내 유가증권 상장기업 중 회사채를 발행한 기업들을 대상으로 보수주의가 신용등급에 미치는 영향을 분석하였다. 구체적으로, Basu(1997)와 Ball and Shivakumar(2005)의 조건부 보수주의 모형(conditional conservatism model)을 이용하여 신용등급 및 신용등급 변화와 보수주의 수준을 관찰하였다. 연구결과를 요약하면 다음과 같다. 먼저 기업의 투자등급에 속하는 신용등급을 가진 기업들이 투기등급을 가진 기업들보다 더 보수적이라는 증거는 찾지를 못했다. 추가분석의 민감도 분석에서도 전반적으로 일관적인 결과가 관찰되었다. 둘째, 투자등급에 속하는 기업들의 신용등급이 상향조정된 경우 보수주의 수준이 높은 것으로 나타났다. 셋째, 표본을 신용등급 상향조정 그룹, 하향조정 그룹, 변화가 없는 그룹으로 구분하여 분석한 결과에서는 신용등급이 상향조정된 기업들이 하향조정 혹은 변화가 없는 기업에 비해서 보수주의 수준이 유의적으로 더 높은 것으로 나타났다. 본 연구의 결과는 보수주의의 수준이 기업의 신용등급을 예측하는데 추가적인 정보를 제공하는 지표로써 활용될 수 있다는 것을 발견했다는 점에서 의미가 있다.