Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 21, 2023 erstellt
Description:
Inflated credit ratings temporarily reduce the cost of debt and mitigate the impact of the tax avoidance risk premium. Consistent with this, we show that rating inflation is positively related to future tax avoidance, particularly for firms with less intense debtholder monitoring. The relation is stronger when managers have greater career concerns, which suggests firms respond differently when the cost of debt is lower due to upwardly-biased ratings compared to when the cost of debt is lower due to high but accurate ratings. Our results indicate that rating inflation temporarily fools some investors and allows firms to engage in short-term risk-shifting through tax avoidance