TY - JOUR
T1 - Corporate integrity culture and credit rating assessment
AU - Bao, Xin
AU - Han, Meini
AU - Lau, Raymond
AU - Xu, Xiaowei
PY - 2024/6
Y1 - 2024/6
N2 - Recent research has started to acknowledge the vital role of soft information in shaping credit rating outcomes. We extend this literature by investigating the effect of corporate integrity culture on the credit rating process and document a significant positive relationship between a culture of integrity and corporate credit ratings. We further show that this relationship is from both an indirect effect of integrity on a reduced financial risk, and a direct effect of integrity in signalling the creditworthiness of the underlying firm. When an alternative signalling device, such as firm reputation, earnings management activity, and Carbon Disclosure Project involvement, contradicts with integrity culture, integrity is no longer a significant predictor of credit ratings. Our results suggest that corporate culture plays an important role in the credit rating assessment process. © 2024
AB - Recent research has started to acknowledge the vital role of soft information in shaping credit rating outcomes. We extend this literature by investigating the effect of corporate integrity culture on the credit rating process and document a significant positive relationship between a culture of integrity and corporate credit ratings. We further show that this relationship is from both an indirect effect of integrity on a reduced financial risk, and a direct effect of integrity in signalling the creditworthiness of the underlying firm. When an alternative signalling device, such as firm reputation, earnings management activity, and Carbon Disclosure Project involvement, contradicts with integrity culture, integrity is no longer a significant predictor of credit ratings. Our results suggest that corporate culture plays an important role in the credit rating assessment process. © 2024
KW - Corporate culture
KW - Credit Risk
KW - Integrity
UR - http://www.scopus.com/inward/record.url?scp=85193069124&partnerID=8YFLogxK
UR - https://www.scopus.com/record/pubmetrics.uri?eid=2-s2.0-85193069124&origin=recordpage
U2 - 10.1016/j.intfin.2024.102007
DO - 10.1016/j.intfin.2024.102007
M3 - RGC 21 - Publication in refereed journal
SN - 1042-4431
VL - 93
JO - Journal of International Financial Markets, Institutions and Money
JF - Journal of International Financial Markets, Institutions and Money
M1 - 102007
ER -