Determinants and Impacts of Internal Credit Rating

Abstract

This study enrich the research in the area of credit rating by adding supportive power to the explanation of using factors which have an influence on the CR. Such a power can increase the awareness of the current situation of CR as a subject in one of the developing countries that has unique political and economic characteristics. The results in summary confirm that firm characteristic variables have a significant impact on CR. Profitability is positively associated with CR for all models, while leverage and loss propensity are associated negatively with CR for all (or nearly all regarding loss propensity) models. However, capital intensity is not important. Only size and growth potential (Tobin’s q) are very strongly positively associated with CR. By contrast, type of sector and audit are not related to CR.