Firms' use of accounting discretion to influence their creditratings

Walid Alissa, Samuel B. Bonsall, Kevin Koharki, Michael W. Penn

Research output: Contribution to journalArticlepeer-review

125 Scopus citations


This paper examines whether firms that deviate from an empirically modeled ("expected") credit rating engage in earnings management activities, as measured by abnormal accruals and real activities earnings management. We find evidence that firms use income-increasing (-decreasing) earnings management activities when they are below (above) their expected ratings. We then test whether such actions are successful in helping these firms move toward their expected credit ratings. The results suggest that firms below or above their expected credit ratings may be able to move toward expected ratings through the use of directional earnings management.

Original languageEnglish (US)
Pages (from-to)129-147
Number of pages19
JournalJournal of Accounting and Economics
Issue number2-3
StatePublished - Apr 2013

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics


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