Do Regulations Based on Credit Ratings Affect a Firm's Cost of Capital?

In February 2003, the SEC officially certified a fourth credit rating agency, Dominion Bond Rating Service ("DBRS"), for use in bond investment regulations. After DBRS certification, bond yields change in the direction implied by the firm's DBRS rating relative to its ratings from other certified rating agencies. A one notch better DBRS rating corresponds to a 39 basis point reduction in a firm's debt cost of capital. The impact on yields is driven by cases where the DBRS rating is better than other ratings and is larger among bonds rated near the investment-grade cutoff. These findings indicate that ratings-based regulations on bond investment affect a firm's cost of debt capital.

Market power and reputational concerns in the ratings industry

This paper studies the incentives of rating agencies to reveal the information that they obtain about their client firms. In the model, rating agencies seek to maximize their reputation and protect their market power. They observe public information and obtain either precise or noisy private information about a firm. Reputational concerns dictate that a rating reflects private information when it is precise. However, when private information is noisy, two situations arise. In a monopoly, the rating agency may ignore private information and issue a rating that conforms to public information. Under some conditions, it may even become cautious and issue bad ratings ignoring both types of information. With competition, however, it has incentives to contradict public information as a way to pretend that it holds precise private information. Moreover, it may become more likely to issue good ratings in an attempt to protect market power

A Baker\u27s Dozen of Top Antimicrobial Stewardship Intervention Publications in 2018

© The Author(s) 2019 Phytochemical investigation of methanolic extract of Limonium leptophyllum (Plumbaginaceae), led to the isolation of 1 new isoflavonoid with a rare 5-membered dihydrofuran ring (1, leptoisoflavone A) and 8 known compounds. The known isolated compounds were identified as euchrenone b9 (2), auriculasin (3), kaempferol (4), avicularoside (5), myrice-tin-3-arabinoside (6), trans-N-feruloyltyramine (7), trans-N-caffeoyltyramine (8), and β-sitosterol (9). The crude methanolic extract exhibited moderate activity toward endocannabinoid receptors. Auriculasin (3) showed activity toward cannabinoid receptor type 1 (86.7% displacement with IC50 8.92 μM)

The Economics of Debt Collection: Enforcement of Consumer Credit Contract,”

Abstract In the U.S., third-party debt collection agencies employ more than 140,000 people and recover more than $50 billion each year, mostly from consumers. Informational, legal, and other factors suggest that original creditors should have an advantage in collecting debts owed to them. Then, why does the debt collection industry exist and why is it so large? Explanations based on economies of scale or specialization cannot address many of the observed stylized facts. We develop an application of common agency theory that better explains those facts. The model explains how reliance on an unconcentrated industry of third-party debt collection agencies can implement an equilibrium with more intense collections activity than creditors would implement by themselves. We derive empirical implications for the nature of the debt collection market and the structure of the debt collection industry. A welfare analysis shows that, under certain conditions, an equilibrium in which creditors rely on third-party debt collectors can generate more credit supply and aggregate borrower surplus than an equilibrium where lenders collect debts owed to them on their own. There are, however, situations where the opposite is true. The model also suggests a number of policy instruments that may improve the functioning of the collections market

Do audit fees and audit hours influence credit ratings?: A comparative analysis of Big4 vs Non-Big4

We examine the relationship between credit ratings / changes and audit fees (hours) for Big4 and Non-Big4 firms. Audit fee (hours) may be considered as a default risk metric for credit ratings agencies. However, firms audited by Big4 are larger, better performing and operate with lower leverage compared to firms followed by Non-Big4. Therefore, the association between audit fee (hours) may be different for firms followed by Big4 and Non-Big4 audit firms. We find that there is a negative association between audit fees and credit ratings for firms followed by Big4 audit firms. However, we find an insignificant relation for firms followed by Non-Big4. We conjecture the different association due to the Big4 firms having more robust accounting procedures; Big4 firms must offer competitive audit fees because they are engaged in fierce competition with other Big4 firms. Moreover, Big4 and Non-Big4 firms have different relationships with their clients because Non-Big4 firms are more income dependent on their clients. Using a sample of 1,717 firm–year observations between 2002 and 2013, we establish a relation between audit fees in period t and credit ratings in period t+1, for firms followed by Big4 auditors. We do not find a significant relation for firms followed by Non-Nig4 firms, suggesting that credit ratings agencies perceive audit fee differently for Big4 and Non-Big4 firms. Client firms followed by Big4 auditors that experience a credit rating change in period t+1 pay lower audit fees in period t compared to firms that do not experience a credit rating change. Our additional analysis suggests a different association between firms audit fees and firm performance for firms that experience a credit rating increase and decrease. Firms that experience a credit ratings increase in period t+1 have strong performance and lower audit fees in period t. On the other hand, firms that experience a credit rating decrease have weak financial performance and negative audit fees compared to firms that do not experience a credit ratings change. Our results suggest that audit fees combined with financial performance influence a credit ratings agency' perception of default risk

A Baker\u27s Dozen of Top Antimicrobial Stewardship Intervention Publications in 2018

With an increasing number of antimicrobial stewardship-related articles published each year, attempting to stay current is challenging. The Southeastern Research Group Endeavor (SERGE-45) identified antimicrobial stewardship-related peer-reviewed literature that detailed an actionable intervention for 2018. The top 13 publications were selected using a modified Delphi technique. These manuscripts were reviewed to highlight the actionable intervention used by antimicrobial stewardship programs to provide key stewardship literature for teaching and training as well as to identify potential intervention opportunities within one\u27s institution