earticle

영어

Many studies highlight the positive effect of corporate credit rating changes on firm performance, but the evidence on the productivity effect of the credit rating changes is very limited. This paper empirically examines effects of credit rating changes on labor productivity over the period 2001-2009 for Korean listed and non-listed manufacturing firms. The paper employs the two way random effect model of labor productivity and controls for simultaneity using lagged variables. Our key findings are as follows. First, our empirical findings show that the higher credit rating is positively associated with an increase in labor productivity during the sample period. This suggests that the higher credit rating for a firm can have more capital availability in Korea. Second, the productivity effect of the credit rating changes for the SMEs can be realized through an increase in capital, not in R&D investment. This implies that the higher credit rating indicates the lower risk of the corporate defaulting on the loan which causes the SMEs to lower borrowing cost and thus to induce capital investment, but not enough to expand R&D investment.