Initial credit ratings and voluntary disclosure : Evidence from Korea

Abstract

ABSTRACT This study examines the effect of initial credit ratings on voluntary disclosure in Korea. Managers are concerned about initial credit ratings because they become the benchmark for future debt issues. Therefore, firms may have incentives to opportunistic disclosure in order to get favorable credit ratings during the initial credit rating evaluation. We find that the frequency of voluntary disclosures at the time of initial credit rating evaluations are greater than during the two accounting periods before and after the evaluation. This study provides insights that firms have incentives to expand voluntary disclosure to obtain favorable initial ratings.