Does market risk predict credit risk? An analysis of firm risk sensitivity, evidence from South Korea*

Lim, Hyoung joo and Mali, Dafydd ORCID: https://orcid.org/0000-0003-3582-2429 (2018) Does market risk predict credit risk? An analysis of firm risk sensitivity, evidence from South Korea*. Asia-Pacific Journal of Accounting and Economics, 25 (1-2). pp. 235-252. ISSN 1608-1625

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Abstract

We empirically test the relation between stock volatility (market risk) and credit ratings (credit risk) using KRX listed firms. We find a negative relation between stock volatility and credit ratings. The results suggest that as stock price volatility increases, a firm is more likely to experience a credit rating decrease. After dividing our sample into investment and non-investment grade groups, we find the relation between volatility and a credit rating decrease diminishes in the investment grade sample compared to the non-investment grade sample. Overall, we find investment grade firms are more likely to absorb shocks associated with speculative investment/divestment compared to price sensitive non-investment grade firms.

Item Type:	Article
Additional Information:	Publisher Copyright: © 2016 City University of Hong Kong and National Taiwan University.
Uncontrolled Keywords:	credit ratings,credit risk,investment grade,market risk,stock return volatility,accounting,finance,economics and econometrics ,/dk/atira/pure/subjectarea/asjc/1400/1402
Faculty \ School:	Faculty of Social Sciences > Norwich Business School
Related URLs:	http://www.scopus.com/inward/record.url?...
Depositing User:	LivePure Connector
Date Deposited:	22 Aug 2024 15:30
Last Modified:	25 Sep 2024 18:03
URI:	https://ueaeprints.uea.ac.uk/id/eprint/96331
DOI:	10.1080/16081625.2016.1268060

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