Investigating the Effect of Risk of Non-Repayment of Debts on Credit Rating Due to the Adjusting Role of Financial Constraints

Subject Areas : Management Accounting

zohreh hajiha ¹ , Auob Ghorbani ²

1 - Department of Accounting, East Tehran Branch, Islamic Azad University, Tehran, Iran
2 - Accounting, Faculty of Economics and Management, University of Qom, Qom, Iran

Received: 2022-01-16 Accepted : 2022-01-16 Published : 2021-11-22

Keywords: Risk of Non-Repayment of Debt, credit rating, Financial Constraint,

Abstract :

Objective: Today, identifying the factors affecting the credit rating is of particular importance in terms of comparing the credit risk of one firm with other firms and also in terms of competitiveness of the firm. The purpose of this study was the Investigating the Effect of Risk of Non-Repayment of Debts on Credit Rating Due to the Adjusting Role of Financial Constraints. Method: The present study is an applied research in terms of purpose. Also, in this study, according to the type of data and available analysis methods, the combined data method has been used. Data collection method, document mining method and referring to databases; and the method of data analysis is inferential. In the present study, the required data have been extracted from the new Rahvard software, corporate financial statements and documentation, as well as the Cadal site. The statistical population of the present study is all companies listed on the Tehran Stock Exchange in the period 2012 to 2021 and the software used to prepare data and estimate models is Eviews 10. Combined data model was used to test the research hypotheses. Results: The results of the research hypotheses test show that companies that perform poorly in repaying the principal and interest of their financial obligations cause distrust of creditors, which in turn reduces the credit rating of the company. The results also showed that financial constraints have a positive effect on the relationship between the risk of non-repayment of debts and the credit rating of the company. Thus, companies with financial constraints have a high risk of non-repayment of debts, and as a result, the distrust of creditors increases, which leads to a decrease in the credit rating of companies. Conclusion: Investors and lenders like to pay more attention to companies with less financial constraints. As a result, these companies find greater credibility with investors and lenders through easy financing. Also, the increased risk of non-repayment of debts causes the creditors to be pessimistic about the company for not paying their financial obligations; As a result, in such a situation, easy and varied financing will have a significant impact on reducing the risk of non-repayment of debts and lenders will increase the credit rating of companies. Investors and creditors can use the results of this study to select the right companies to invest. Also, organizations that rank companies can use the risk of non-repayment of debts and financial constraints as two very important and determining factors in the ranking.

References:

• تهرانی، رضا، شمس، میر فیض فلاح، (1391). طراحی و تبیین مدل ریسک اعتباری در نظام بانکی کشور. مجله علوم اجتماعی و انسانی دانشگاه شیراز. دوره بیست و دوم، شماره دوم، تابستان. پیاپی 43. ص 191-211.


• حاجی‌ها، زهره، پژهان، کامیار، (1395). بررسی رابطه بین رقابت در بازار محصول و ریسک عدم بازپرداخت بدهی‌ها در سررسید در شرکت‌های پذیرفته‌شده در بورس اوراق بهادر تهران. پایان‌نامه کارشناسی ارشد. دانشگاه آزاد واحد شهر قدس.


• گروه، فاطمه؛ محتشمی، علی. (1398). کاربرد شبکه‌های عصبی فازی در رتبه‌بندی اعتباری مشتریان بانک تجارت. کنفرانس ملی تحقیقات علمی جهان در مدیریت، حسابداری، حقوق و علوم اجتماعی، سال 1398، 63-87.


• گودرزی آرش، تهرانی رضا، (1395). تأثیر تصاحب شرکت‌ها بر محدودیت‌های مالی شرکت‌های هدف، مجله دانش حسابداری، سال هفتم، شماره 27، ص 83-108.


• میر جلیلی، اعظم، کابلی، مونا سادات، (1391). کلیاتی بر مؤسسات رتبه‌بندی اعتباری و نقش آن‌ها در بازار سرمایه. واحد آموزش، پژوهش و توسعه کارگزاری بانک ملی ایران ص 100-136.


• نعمتی پویا، مینا، توسکی، امیدفرهاد، (1398). بررسی رابطه بین ریسک ویژه، رتبه‌بندی اعتباری، ریسک اعتباری و مدیریت سود. اولین کنفرانس بین‌المللی رویکردهای نوین در مدیریت کسب‌وکار و حسابداری با تأکید بر ارزش‌آفرینی و اقتصاد مقاومتی. سال 1398.


• هیبتی، فرشاد؛ نوری بروجردی، پیمان. (1387). نظام جامع سنجش اعتبار (گزارشگری، امتیازدهی و رتبه‌بندی اعتباری در بانک و بیمه)، چاپ اول، انتشارات ترمه، شرکت مشاوره رتبه‌بندی اعتبار ایران. 40-68.


• Andriosopoulos, D., & Lasfer, M. (2015). The market valuation of share repurchase in Europe. Journal of Banking & Finance, 55, 327–339.


• Chabowski, B., Chiang, W.C., Deng, K., & Sun, L. (2019). Environmental inefficiency and bond credit rating. Journal of Economics and Business, 101, 17-37.


• Chen, T. K., H. H. Liao, and H. J. Kuo. (2013). Internal liquidity risk, financial bullwhip effects, and corporate bond yield spreads: Supply chain perspectives. Journal of Banking & Finance 37 (7):2434–56.


• Chen, Y., Huang, Y., and Chen, C. (2009). Financing Constraints, Ownership Control, and Cross-Border M&As: Evidence from Nine East Asian Economies, Corporate Governance: an International Review, Vol. 17, No. 6, 665-


• Flaherty, M., A. Gevorkyan, S. Radpour, and W. Semmler. (2017). Financing climate policies through climate bonds: A three stage model and empirics. Research in International Business and Finance 42:468–79.


• Gong, G., S. Xu, and X. Gong. (2018). On the value of corporate social responsibility disclosure: An empirical investigation of corporate bond issues in China. Journal of Business Ethics 150 (1):227–58.


• Goodarzi, A, Tehrani R, (2017). The Impact of Corporate Acquisition on Financial Restrictions of Target Companies, Journal of Accounting Knowledge, Year 7, No. 27, pp. 83-108. [In Persian].


• Goroh, F; Mohtashami, A. (2020). Application of fuzzy neural networks in credit rating of Tejarat Bank customers. National Conference on World Scientific Research in Management, Accounting, Law and Social Sciences, 2020, 63-87. [In Persian].


• Hajiha, Z, Pejhan, K, (2017). Investigating the relationship between competition in the product market and the risk of non-repayment of debts at maturity in companies listed on the Tehran Stock Exchange. Master Thesis. Quds City Azad University.


• Hibati, F; Nouri Boroujerdi, P. (2009). Comprehensive Credit Assessment System (Reporting, Scoring and Credit Rating in Banking and Insurance). First Edition, Termeh Publications, Iran Credit Rating Consulting Company, 40-68. [In Persian].


• Kashif, M., Ahmed, J., Islam, M., & Gillani, U. F. (2019). Effect of Credit Rating on Trade Credit: Empirical Evidences from Pakistani Non-financial sector. Sukkur IBA Journal of Management and Business, 6(1), 1.


• Liao, C. (2014). What drives corporate block acquisitions? The case for financial constraints. Journal of Corporate Finance, 26, 78-95.


• Liu, M., and M. Magnan. (2016). Conditional conservatism and the yield spread of corporate bond issues. Review of Quantitative Finance and Accounting 46 (4):84–79.


• Mirjalili, A; Kabuli, M. (2013). Overview of Credit Rating Institutions and Their Role in the Capital Market. Bank Melli Iran Brokerage Training, Research and Development Unit, 145-131. [In Persian].


• Nemati, D; Mina, T; Omid, F. (2020). Investigating the relationship between special risk, credit rating, and credit risk and earnings management. The first international conference on new approaches to business management and accounting with an emphasis on value creation and a resilient economy, 21- [In Persian].


• Ni-Yun Chena, Kun-Chih Chenb, Chi-Chun Liub. (2019). Debt-financed repurchases and credit ratings with the respect of free cash flow and repurchase purpose. North American Journal of Economics and Finance.


• Oikonomou, I., C. Brooks, and S. Pavelin. (2014). The effects of corporate social performance on the cost of corporate debt and credit ratings. Financial Review 49 (1):49–75.


• Preclaw, R., and A. Bakshi. (2015). The cost of being Green. Barclays Report: US Credit Focus The Cost of Being Green.pdf.


• Reddy, K., Bosman, R., & Mirza, N. (2019). IMPACT OF CREDIT RATINGS ON STOCK RETURNS. Buletin Ekonomi Moneter dan Perbankan, 21(3), 343-366.


• Tehrani, R, Shams, M, (2013). Designing and explaining the credit risk model in the country's banking system. Journal of Social Sciences and Humanities, Shiraz University. Twenty-second period, second issue, summer. Consecutive 43. pp. 211-191. [In Persian].