Stock Ownership Guidelines and Corporate Credit Ratings

This paper investigates the influence of stock ownership guidelines on credit ratings for a sample of US firms. We document a positive association between CEO stock ownership guidelines and long-term credit ratings, suggesting that ownership guidelines reduce agency conflicts and lead to more favorable credit assessments. Further, we find that our results are more pronounced among firms operating in competitive markets. Our results are robust to alternative regression specifications and different measures of credit ratings. Our findings reveal that management stock ownership guidelines serve as a non-financial determinant of credit ratings, adding a new dimension to understanding corporate governance applications.