An Impact of Information Asymmetry on Corporate Value: Focusing on Credit Ratings

Abstract

This paper explores the significance of the premise that credit ratings can reflect the qualitative information of profits and used earnings persistence, a substitute of „quality of profits‟ to analyse the difference in „quality of profits‟ because information on the quality of profits may be differed by credit ratings, and materialized the effect of credit ratings as information from a different angle. As a result, it was found that corporate information asymmetry had a negative impact on long-term corporate value and did not have a significant an impact on short-term value. Also, information asymmetry of a company whose credit rating was in speculation grade did not have a significant impact on short-term and long-term corporate values. This suggests that asymmetric information cannot have an impact on short-term corporate value, whereas long-term corporate value is affected by the negative effect of an outsider who recognized asymmetric information. Therefore, the purpose of this paper is to examine how the corporate value has been changed on the differences between internal and external information. Also, this study seeks to examine the differences of that causal relationship based on Agency Evaluation Index.