Dr. Wenye Tang, along with co‑authors Aaron Nelson and Eva Liang, recently published “Positive Externalities of Credit Ratings: Customer Downgrades, Supplier Performance, and Investor Perception” in Accounting & Finance.
Using an empirical approach, the study examines how a major customer’s credit rating downgrade alters the information environment surrounding supplier firms and affects investor responses to suppliers’ earnings announcements.
The findings show that suppliers’ earnings response coefficients weaken following a customer downgrade, consistent with investors revising expectations about future performance, earnings persistence, and growth. The study also documents deteriorating customer relationships and lower operational efficiency after a downgrade, highlighting that credit ratings generate valuable information not only for debt holders, but also for equity investors.
Dr. Wenye Tang
Dr. Wenye Tang