How an Issuer’s Multiple Credit Ratings Can Affect Its IPO

While the list of prospective issuers with credit ratings is lengthy, literature is sparse on how ratings from multiple credit rating agencies (CRAs) affect the performance of a company’s initial public offering (IPO). Our research is motivated by the lack of such literature and by Sangiorgi and Spatt (2017), who argue that multiple ratings are socially optimal if the benefit of the additional rating outweighs the cost of information production. This argument aligns with the “shopping hypothesis” and “information production hypothesis” of Bongaerts et al. (2012). Under the former hypothesis, issuers “shop” for an additional rating in hopes of improving … Read more

How Acquisition Performance Affects the Market for Non-Executive Directors

In the United Kingdom, successive codes of best practice in corporate governance have highlighted the important role of outside or non-executive directors in ensuring that corporations are run for the benefit of their shareholders. While the first code of best practice, the 1992 Cadbury Report, recommended that there should be a sufficient number of non-executives on the board, the 2003 Higgs Report was much more prescriptive, recommending that there should be a majority of non-executives on the board (excluding the chairman). Similarly, U.S. regulation has been emphasizing the important role of independent or non-executive directors. More specifically, the NYSE and … Read more