Man Dang, Premkanth Puwanenthiren, Mieszko Mazur, Viet Anh Hoang, Sivathaasan Nadarajah and Thieu Quang Nguyen 2025. Firm Complexity and Credit Ratings. International Review of Financial Analysis. 104267 (Part A) 104267. https://doi.org/10.1016/j.irfa.2025.104267
| Title | Firm Complexity and Credit Ratings |
|---|---|
| Type | Journal article |
| Authors | Man Dang, Premkanth Puwanenthiren, Mieszko Mazur, Viet Anh Hoang, Sivathaasan Nadarajah and Thieu Quang Nguyen |
| Abstract | This paper examines the effect of firm complexity on credit ratings. Using a sample of U.S. non-financial firms and the state-of-the-art measure of firm complexity, we document a significantly negative relation between firm complexity and credit ratings, suggesting that rating agencies assign significantly lower credit score to more complex firms. Our results remain robust to alternative specifications and various endogeneity checks. Moreover, we find that the negative effect on credit ratings becomes weaker in more transparent and better-governed firms. Finally, we show that the effect is more pronounced during periods of high policy uncertainty. Overall, our paper provides a better understanding of complex firms and underscores the importance of transparency that enhances creditworthiness and thus mitigates credit risk. |
| Keywords | Firm complexity |
| Credit ratings | |
| Information asymmetry | |
| Corporate governance | |
| Policy uncertainty | |
| Article number | 104267 |
| Journal | International Review of Financial Analysis |
| Journal citation | 104267 (Part A) |
| ISSN | 1873-8079 |
| 1057-5219 | |
| Year | 2025 |
| Publisher | Elsevier |
| Publisher's version | License CC BY 4.0 File Access Level Open (open metadata and files) |
| Digital Object Identifier (DOI) | https://doi.org/10.1016/j.irfa.2025.104267 |
| Publication dates | |
| Published online | 18 Apr 2025 |
| Published in print | Aug 2025 |