Journal of International Business Studies

, Volume 44, Issue 3, pp 216–234

Credit rating initiation and accounting quality for emerging-market firms

  • Kee-Hong Bae
  • Lynnette Purda
  • Michael Welker
  • Ligang Zhong
Article

DOI: 10.1057/jibs.2013.4

Cite this article as:
Bae, KH., Purda, L., Welker, M. et al. J Int Bus Stud (2013) 44: 216. doi:10.1057/jibs.2013.4

Abstract

We examine whether certification by an internationally recognized information intermediary helps emerging-market firms overcome the liability of foreignness in capital markets. Specifically, we ask whether securing a credit rating from Standard & Poor's (S&P) enables these firms to certify their financial reporting quality. We hypothesize that the unique information demands of lenders motivate firms to provide more conservative financial statements upon securing an S&P rating. We find evidence consistent with this conjecture. Moreover, the rating appears to be part of an international expansion strategy for these firms, and is followed by increased international activity in capital and product markets.

Keywords

emerging marketscredit ratingsliability of foreignnessinternationalization

Copyright information

© Academy of International Business 2013

Authors and Affiliations

  • Kee-Hong Bae
    • 1
  • Lynnette Purda
    • 2
  • Michael Welker
    • 2
  • Ligang Zhong
    • 3
  1. 1.York UniversityNorth YorkCanada
  2. 2.Queen's UniversityKingstonCanada
  3. 3.Southwestern University of Finance and EconomicsChengduChina