Do managers withhold bad news from credit rating agencies?

Minkwan Ahn, Samuel Bonsall, Andrew Van Buskirk

Research output: Contribution to journalArticle

Abstract

Research documents that managers, on average, withhold bad news and emphasize good news in their public disclosures. We ask whether the same is true in their private communications with credit rating agencies. We study how rating agencies anticipate and react to public information events as a function of their access to rated firms’ private information. We show that, in terms of ratings downgrades, rating agencies exhibit relatively more anticipation and less reaction to negative (compared to positive) public information events when they have more access to private information. Our results are strongest when firms are most optimistic in their public disclosures and are not due to rating agencies focusing their efforts on downside risk. Overall, we find consistent evidence that rated firms provide less optimistic information to rating agencies in their private communications and that this information is reflected in credit ratings.

Original languageEnglish (US)
Pages (from-to)972-1021
Number of pages50
JournalReview of Accounting Studies
Volume24
Issue number3
DOIs
StatePublished - Sep 15 2019

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Rating agencies
Credit rating agencies
Managers
News
Public information
Communication
Private information
Public disclosure
Downside risk
Anticipation
Rating
Credit rating

All Science Journal Classification (ASJC) codes

  • Accounting
  • Business, Management and Accounting(all)

Cite this

Ahn, Minkwan ; Bonsall, Samuel ; Van Buskirk, Andrew. / Do managers withhold bad news from credit rating agencies?. In: Review of Accounting Studies. 2019 ; Vol. 24, No. 3. pp. 972-1021.
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Do managers withhold bad news from credit rating agencies? / Ahn, Minkwan; Bonsall, Samuel; Van Buskirk, Andrew.

In: Review of Accounting Studies, Vol. 24, No. 3, 15.09.2019, p. 972-1021.

Research output: Contribution to journalArticle

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