earticle

영어

This paper analyzes the impact of a downgrade in corporate credit rating on the financial policies of competitors in the same industry. Most previous research on credit ratings provides a model for estimating credit ratings based on firms’ financial characteristics; the pattern of stock or bond returns after credit rating changes; the competitiveness of the credit rating market; or the reliability of ratings before or after the global financial crisis. Credit rating adjustment, however, is under-researched. This important event provides investors and other stakeholders with information on firm valuation and has a direct impact on financing costs, thus profoundly affecting firm growth and financial stability. We investigate the following two conflicting hypotheses. First, downgrading the credit rating of a particular firm may act as an industry-wide negative signal to the market. This will affect the investment returns of competing firms, which may lead competing firms within the industry to be more conservative in their financial policies, due to concern about the risk of a corresponding downgrade in their credit ratings. The second hypothesis is that downgrading the credit rating of a particular firm may increase the financial costs of the firm and thereby reduce the intensity of competition in the industry. This may lower the growth potential of the firm, which competitors can use as an opportunity to increase their investment by implementing a more aggressive financial policy. We call the effect described in the former hypothesis the “contagion effect,” and that described in the latter the “competition effect.” To test these conflicting hypotheses, we obtain all of the bond rating data of firms listed on the Korea Composite Stock Price Index from 2005 to 2018 and examine the changes in their corporate financial policy in three dimensions: cash holdings, capital expenditure, and long-term leverage. Studies document that cashing holdings are affected by market risk as well as the risk associated with firms’ business activities. A change in credit ratings can also affect the method of raising funds. Increasing leverage leads to a decline in liquidity due to high interest payments. In addition, an increase in financing costs due to an increase in firm default risk tends to limit external financing for future investments. In addition, the impact of credit rating adjustments within an industry may vary depending on the competitive position of a firm experiencing a credit rating downgrade, the competitive position of competing firms, and the degree of competition in the industry. Firms in a less competitive industry can more aggressively use opportunities to implement financial policies, while firms in a more competitive industry may have to make more aggressive investments to survive. Our empirical results show that a credit rating downgrade tends to lead firms in the same industry to maintain a conservative financial policy by increasing their cash holdings and decreasing their capital expenditure and long leverage. However, this phenomenon varies across competitive positions within an industry. Firms taking a strong competitive position in the top 25th percentile of revenue are more likely to maintain a conservative financial policy when a rating downgrade occurs in their industry. This relationship is more significant when firms whose ratings have been downgraded are in the same competitive position, i.e., in the top 25th percentile of revenue. The results are consistent with the contagion effect hypothesis. In contrast, firms taking a weak competitive position, i.e., in the bottom 25th percentile of revenue, tend to maintain an aggressive financial policy. This relationship is also more significant, both statistically and economically, if firms whose credit ratings have been downgraded are in the weakly competitive group, i.e., the bottom 25th percentile of revenue. This finding is consistent with the competition effect hypothesis. We also find that the results above, linking the contagion effect with highly competitive firms and the competitive effect with weakly competitive firms, are more significant when the industry is more competitive, as measured by the Herfindahl-Hirschman Index. Most existing studies of credit ratings analyze credit rating prediction models, the stock and bond yield behaviors of firms with rating changes, or the reliability of credit ratings and related systems. This paper contributes to the credit rating literature by examining the effects of credit rating changes on the financial policies of competing firms. It also makes an important contribution to the literature on corporate finance, specifically corporate capital structure theory, by providing evidence that changes to firms’ credit ratings are a key determinant of the financial and investment policies of competing firms in the industry. In addition, the finding that risk-seeking behavior varies with the competitive position of a firm may have important policy implications for relevant financial authorities seeking to enhance firms’ financial soundness.

한국어

본 연구에서는 기업 신용등급의 하향 조정이 동일업종 내 경쟁기업의 재무정책에 미치는 영향에 대하여, 전이효과 가설과 경쟁효과 가설이라는 두 가지 상반된 가설을 검증하였다. 2005년부터 2018년까지 유가증권시장 상장기업을 대상으로 분석한 결과, 신용등급 하향이 발생한 경우 동일업종 내 상장기업들은 일반적으로 보수적인 재무정책을 견지하는 것으로 나타났다. 그러나 이러한 현상은 업종 내 경쟁적 지위에 따라 다르게 나타났다. 매출 기준 상위 25% 내 경쟁적 지위가 높은 기업들은 업종 내 등급하향이 발생한 경우 보수적인 재무정책을 견지하는 것으로 나타났다. 특히 이와 같은 현상은 등급하향 발생기업 역시 매출 기준 상위 25% 이내인 기업인 경우 보다 유의하게 나타났다. 이는 전이효과 가설과 일치한 결과이다. 반면 매출 기준 하위 25% 내 기업들은 업종 내 신용등급 하향이 발생한 경우 보다 적극적인 재무정책을 견지하는 것으로 나타났으며, 등급하향 발생기업이 경쟁적 위치가 비슷한 매출 기준 하위 25% 내 기업일 경우 더욱 유의하게 나타났다. 경쟁효과 가설과 일치한다. 이와 같은 현상은 업종 경쟁도가 강할수록 경제적·통계적으로 더욱 유의하게 나타났다. 본 연구는 신용등급 조정이 경쟁기업의 재무정책에 미치는 영향을 최초로 분석하였으며, 기업 재무정책의 새로운 결정요인을 제시하였다는 점에서 의의가 있다.