Dang, M., Puwanenthiren, P., Jones, E., Nguyen, T.Q., Vo, X.V. and Nadarajah, S. 2022. Strategic archetypes, credit ratings, and cost of debt . Economic Modelling. 114 105917. https://doi.org/10.1016/j.econmod.2022.105917
| Title | Strategic archetypes, credit ratings, and cost of debt |
|---|---|
| Type | Journal article |
| Authors | Dang, M., Puwanenthiren, P., Jones, E., Nguyen, T.Q., Vo, X.V. and Nadarajah, S. |
| Abstract | We examine the impact of archetypes of strategic behavior in business, proposed by Miles and Snow (1978, 2003), on corporate credit ratings. Using a sample of U.S. non-financial firms between 1981 and 2016, we document that firms with prospector-type strategies experience significantly lower credit ratings than firms with defender- and analyzer-type approaches. Our results remain robust after controlling for firm fixed effects, using alternative model approaches, propensity score matching approach, and alternative measures. The negative effect on credit ratings is more pronounced in firms with weaker information and governance settings and during periods of high economic policy uncertainty. Further, we find prospector-type firms with weak credit ratings have a higher cost of debt. Overall, our findings stress the need for more transparent and stringent governance systems for prospector-type firms to receive favorable ratings. |
| Keywords | Strategic archetypes |
| Credit ratings | |
| Cost of debt | |
| Information environment | |
| Corporate governance | |
| Policy uncertainty | |
| Article number | 105917 |
| Journal | Economic Modelling |
| Journal citation | 114 |
| ISSN | 0264-9993 |
| Year | 2022 |
| Publisher | Elsevier |
| Accepted author manuscript | License CC BY-NC-ND 4.0 File Access Level Open (open metadata and files) |
| Digital Object Identifier (DOI) | https://doi.org/10.1016/j.econmod.2022.105917 |
| Publication dates | |
| Published online | 03 Jun 2022 |
| Published in print | Sep 2022 |