Research

Short Summary: We investigate how energy-related uncertainty influences corporate credit risk using U.S. firm-level data. We find that higher energy uncertainty leads to lower credit ratings, especially for large, investment-grade, and manufacturing firms, a result reinforced by complementary analyses using Credit Default Swap (CDS) spreads and Probability of Default (PD). We identify two key transmission channels for this impact: firm-performance volatility and systematic risk. Propensity score matching and entropy balancing validate our results. Our findings underscore the importance of incorporating energy-related uncertainty into corporate credit risk assessments.

Short Summary: This study examines the credit rating quality amid geopolitical risk and finds evidence of optimistic credit rating in risky times. Additionally, the study finds support for the conflict of interest as a potential channel of deterioration in credit rating quality.