Open AccessDeterminants and Impacts of Internal Credit Rating
Author(s) -
Abdullah A. K. Alkhawaldeh
Publication year - 2012
Publication title -
international journal of financial research
Language(s) - English
Resource type - Journals
eISSN - 1923-4031
pISSN - 1923-4023
DOI - 10.5430/ijfr.v4n1p120
Subject(s) - leverage (statistics) , profitability index , credit rating , predictive power , capital structure , variables , business , econometrics , economics , monetary economics , actuarial science , statistics , finance , mathematics , debt , philosophy , epistemology
This study enrich the research in the area of credit rating by adding supportive power to the explanation of using factors which have an influence on the CR. Such a power can increase the awareness of the current situation of CR as a subject in one of the developing countries that has unique political and economic characteristics. The results in summary confirm that firm characteristic variables have a significant impact on CR. Profitability is positively associated with CR for all models, while leverage and loss propensity are associated negatively with CR for all (or nearly all regarding loss propensity) models. However, capital intensity is not important. Only size and growth potential (Tobin’s q) are very strongly positively associated with CR. By contrast, type of sector and audit are not related to CR