The Impact of Credit Rating on Firm Performance and Stock Return; Evidence from Pakistan
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Date
2016
Authors
Journal Title
Journal ISSN
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Publisher
University of Management and Technology Lahore
Abstract
The respective study focus on three aspects; factors determining credit rating, the impact of CR on act of firm & the relation between return of stocks and credit rating. The study focuses on the firms listed in Karachi Stock Exchange (KSE) of Pakistan. The empirical analysis uses the data of 49 firms rated by Pakistan Credit Rating Agency (PACRA) for the time period of 6 years, 2009-2014. Two estimation techniques have been applied, Ordered Probit Model and Panel data Regression. Our findings illustrate credit ratings are predicted by important firm specific factors (size, growth opportunities and capital intensity, asset returns, sector type). Moreover, it is suggested further that firm with higher credit rating tend to have better performance (measured byTobin’s Q& ROA) of listed firms. Likewise, higher rated firms tend to achieve higher returns on their stocks.
Description
Supervised by:Prof. Dr. Nouman Afgan
Keywords
Credit Ratings, Financial Attributes, MS Thesis