This study investigated the influence of credit ratings on the financial performance of companies listed in the S&P 500 index. The researchers discovered a lack of research in this area, with only two studies found, one proposing the use of credit ratings as a measure of financial performance and another applying this concept. Most existing research predominantly relies on measures such as leverage, profitability, liquidity, and share return to explain financial performance. To address this gap, the study conducted an empirical analysis using panel data regression models with a dataset comprising 292 companies rated by S&P Global Ratings from 2009 to 2013. The study employed Return on Assets (ROA) and Tobin's Q (TQ) as dependent variables and considered credit ratings in conjunction with variables such as Total Debt to Total Assets (TDTA), Total Shareholder Return (TSR), EBITDA Interest coverage (EBITDAICOV), Quick Ratio (QR), Altman's Z-Score (AZS), as well as macroeconomic factors including GDP growth, inflation (CPI), and the Federal Reserve Interest Rate (FDRI) as independent variables. The study argued that credit ratings, incorporating historical data and confidential information about companies' strategies, provide reliable forward-looking assessments of creditworthiness to the market. This argument is supported by specialized rating agencies that employ their methodologies. The findings indicated that firms with higher credit ratings tend to perform better. To extend this research, future studies could explore ratings issued by other credit rating agencies while incorporating additional independent variables such as Return on Equity (ROE), Market Share, and Return on Invested Capital.
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