Séminaire du groupe de recherche Finance : Florian KIESEL et Nils LANG

Florian KIESEL (Grenoble Ecole de Management)

What’s in a Rating Report? Parsing the Content of Moody’s Credit Rating Reports from 1998-2016

Florian Kiesel and Darren J. Kisgen

We examin e the readability, length, numerical content, uncertainty, and uniqueness of Moody’s rating reports and analyze how regulatory events have influenced these measures between 1998-2016. We find that information in rating reports significantly dropped after the Credit Rating Reform Act in 2006, but readability and the length of rating reports significantly improved after the Dodd-Frank regulation in 2010. We also find that greater readability leads to lower announcement returns after downgrades. Reports that are more similar to previous reports are associated with less negative announcement returns, providing evidence that the content of rating reports plays a significant role for investors.
> SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3723861

 

Nils LANG (emlyon business school)

The Positive Effect of Vesting Terms on Venture Growth: Self Selection or Incentivizing?

There is empirical evidence that vesting of stock options for CEOs of large corporations impacts firm performance. Theory suggests that this may also apply for entrepreneurs, i.e. founder-managers of young ventures, as vesting potentially incentivizes efforts. Self-selection of ventures with a higher probability of successful performance offers a second possible explanation. The present paper is the first to empirically explore this relationship. It aims to disentangle incentivizing from self-selection, using a switching model first proposed by Lee (1987). Based on a novel unique hand-collected sample of 215 investments in early-stage German high-tech ventures and their respective monthly granular performance data, results confirm the positive impact of stronger vesting terms on venture growth. The switching model provides strong support for the existence of the incentivizing effect but no specific evidence of a self-selection effect.