EXPLORING THE RELATION BETWEEN IMPLIED CREDIT RATING AND SHARES PRICES: A CASE STUDY ON MOBILE TELECOMMUNICATION COMPANIES IN KUWAIT

This study investigates the relationship between implied credit ratings and share prices in Kuwait’s telecommunications sector, focusing on three major companies listed on the Kuwait Stock Exchange (KSE). Despite controversies surrounding credit rating agencies (CRAs) due to issues such as perceived bias and their role in past financial crises, investors continue to depend on CRA assessments. However, some companies hesitate to seek formal ratings due to the associated costs or the risk of exposing financial weaknesses. Using Altman and Hotchkiss’s (2010) Z-score model, this research calculates implied credit ratings based on internal financial data from 2016 to 2023 and employs Ordinary Least Squares (OLS) regression to analyse the relationship between these ratings and share price performance. The findings reveal that Zain, with a B+ rating, falls within the grey zone, indicating potential financial challenges, while Ooredoo and STC remain in the safe zone with ratings of AA- and A+, respectively. A statistically significant positive relationship was identified between implied credit ratings and share prices, suggesting that internal credit assessments exert a substantial influence on investor perceptions and market valuation in Kuwait’s telecommunications sector. These results underscore the value of implied credit ratings as a practical alternative to formal CRA ratings, particularly in emerging markets with limited access to comprehensive external credit assessments.