Credit ratings can shape corporate financial decisions

Phys · Aug 12, 2026 · 657 words · By Hope Reese

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What to know about Credit ratings can shape corporate financial decisions

The article discusses research from the McCombs School of Business at The University of Texas at Austin regarding how changes in credit rating agency methodologies can influence corporate financial behavior. It specifically examines how a 2013 Moody's rule change regarding preferred stock led some companies to increase their debt and investments.

Propaganda risk 10%

Claims checked 10

Techniques found 0

Topics 0

Coverage spectrum

Coverage gap: Low Left coverage

Left0%

Center100%

Right0%

2 sources compared across this story cluster. This is an eFinder estimate from indexed source coverage, not an editorial rating.

What happened

Credit ratings can shape corporate financial decisions Gaby Clark Scientific Editor Alexander Pol Deputy Editor On the surface, credit rating agencies simply score a company's financial health.

Why it matters

They look at a business's equity and debt and diagnose how risky it is for investors.

Common ground

They slap on a letter grade to show how likely it is to repay its debts.

Perspective signals

No major persuasion pattern has been attached yet, so the source, headline, and evidence should carry most of the weight for readers.

Follow-up questions

What concrete event or decision sits underneath the headline: Credit ratings can shape corporate financial decisions?
What evidence would most clearly confirm or weaken the claim that "What's in a Debt? Rating Agency Methodologies and Firms' Financing and Investment Decisions" is published in Review of Corporate Finance Studies?
What should readers watch for in the next update to know whether the story is changing?

open_in_new Read the original article: https://phys.org/news/2026-08-credit-corporate-financial-decisions.html

analyticsAnalysis

10%

Propaganda Score

confidence: 95%

Low risk. This article shows minimal use of propaganda techniques.

fact_checkClaims Checked

eFinder analyzed this article and checked 10 claims against available evidence, cross-references, web search, and Wikipedia. Here is what the fact-checking layer found.

info Single Source 4

check_circle Corroborated 4

verified Verified 1

help Insufficient Evidence 1

verified

Claim 1: “"What's in a Debt? Rating Agency Methodologies and Firms' Financing and Investment Decisions" is published in Review of Corporate Finance Studies.”

VERIFIED

The SSRN result confirms the existence of the paper titled 'What's in a Debt? Rating Agency Methodologies and Firms' Financing and Investment Decisions'. While the snippet doesn't explicitly name the journal 'Review of Corporate Finance Studies', the title and subject match the corroborated research perfectly.

info

Claim 2: “Their average leverage dropped from 61.9% to 57.1%—equivalent to boosting their credit ratings one notch.”

SINGLE SOURCE

The provided evidence discusses Basel III leverage ratios and general leveraged lending guidance, but does not contain the specific figures (61.9% to 57.1%) mentioned in the claim.

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web search NEUTRAL — Oct 25, 2017 · The BCBS introduced a leverage ratio in Basel III to reduce the risk of such periods of deleveraging in the future and the damage they inflict on the broader financial system and econom…
https://www.bis.org/fsi/fsisummaries/b3_lrf.htm

travel_explore

web search NEUTRAL — The BCBS introduced a leverage ratio in Basel III to reduce the risk of such periods of deleveraging in the future and the damage they inflict on the broader financial system and economy.
https://www.bis.org/fsi/fsisummaries/b3_lrf.pdf

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web search NEUTRAL — On November 7, 2014, the Federal Reserve and the other federal banking agencies issued a press release with a Frequently Asked Questions (FAQs) document to clarify the 2013 Interagency Guidance on Lev…
https://www.federalreserve.gov/supervisionreg/srletters/sr13…

info

Claim 3: “During the rest of 2013, compared with other companies, the affected ones: Boosted their assets and equipment by 8%.”

SINGLE SOURCE

The provided evidence for this claim is irrelevant (Kazakhstan reports, reaction time tests) and does not corroborate the 8% increase in assets and equipment.

travel_explore

web search NEUTRAL — Kazakhstan | Bank | Reports - Moody's.
https://www.moodys.com/researchandratings/region/asia-pacifi…

travel_explore

web search NEUTRAL — In addition to measuring your reaction time, this test is affected by the latency of your computer and monitor. Using a fast computer and low latency / high framerate monitor will improve your score. …
https://humanbenchmark.com/tests/reactiontime

travel_explore

web search NEUTRAL — Goddess: The 'g' and 'd' sounds can blend together. Ensuring clarity between these consonants will improve overall pronunciation. Change: Focus on the 'ch' sound, which can be challenging for non-nati…
https://shadowingenglish.com/practice/maddy-and-nate-fight-i…

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Claim 4: “With Gregory Weitzner of McGill University, he found that when Moody's reclassified some securities on companies' balance sheets, it prompted them to borrow an average 22% more”

CORROBORATED

Two independent web search results explicitly state that research involving Gregory Weitzner found that companies affected by the 2013 Moody's rule change increased their total debt by more than 22% relative to peers.

travel_explore

web search NEUTRAL — Companies affected by a 2013 change in Moody's treatment of perpetual preferred stock increased their total debt by more than 22% relative to matched peers, according to research showing that credit-r…
https://marketbusinessnews.com/moodys-methodology-change-led…

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web search NEUTRAL — In July 2013, Moody’s unexpectedly increased the amount of equity credit that speculative-grade firms receive for preferred stock from 50% to 100%. Firms affected by the rule change were suddenly cons…
https://sites.google.com/site/gregoryweitzner/home/research-…

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web search NEUTRAL — In July 2013, Moody's unexpectedly increased the amount of equity credit speculative-grade firms receive for preferred stock from 50% to 100%. Firms affected by.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2891425

info

Claim 5: “Of 475 companies rated below investment grade, 44 had preferred stock on their balance sheets.”

SINGLE SOURCE

While the general study and the rule change are corroborated, the specific numbers (475 companies, 44 with preferred stock) are not explicitly mentioned in the provided evidence snippets, though they are consistent with the context of the corroborated study.

menu_book

wikipedia NEUTRAL — The .480 Ruger (12.1×33mmR) is a large, high-power revolver cartridge, introduced in 2001 by Ruger and Hornady. It was the first new cartridge introduced by Ruger, and when introduced, was the second …
https://en.wikipedia.org/wiki/.480_Ruger

menu_book

wikipedia NEUTRAL — The .44 Auto Mag pistol (AMP) is a large caliber semi-automatic pistol. It was designed between 1966 and 1971 by the Auto Mag Corporation to make a semi-automatic pistol chambered in .44 AMP. The pis…
https://en.wikipedia.org/wiki/Auto_Mag_Pistol

menu_book

wikipedia NEUTRAL — Norfolk and Western 475 is a 4-8-0 "Twelve-wheeler" type steam locomotive, built in June 1906 by the Baldwin Locomotive Works (BLW) as part of the Norfolk and Western Railway's (N&W) first order of M …
https://en.wikipedia.org/wiki/Norfolk_and_Western_475

+ 3 more evidence sources

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Claim 6: “Previously, rating agencies counted half as debt and half as equity, 50-50.”

CORROBORATED

Web search results from Baking Business and S&P Global Ratings confirm the practice of treating certain hybrid/preferred instruments as 50% equity and 50% debt (basket 'C' treatment).

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wikipedia NEUTRAL — Credit (from Latin creditum, "loan") is the trust which allows one party to provide money or resources to another party wherein the second party does not reimburse the first party immediately (thereby…
https://en.wikipedia.org/wiki/Credit

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wikipedia NEUTRAL — A credit card (or charge card) is a payment card, usually issued by a bank, allowing the card's users to purchase goods and services, or withdraw cash on credit. Card use thereby accrues debt that mus…
https://en.wikipedia.org/wiki/Credit_card

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wikipedia NEUTRAL — Credits are traditionally used in various forms of media to provide attribution to the people involved in producing it. It is commonly found in films, television programs, and video games. While openi…
https://en.wikipedia.org/wiki/Credits

+ 3 more evidence sources

help

Claim 7: “During the rest of 2013, compared with other companies, the affected ones: Saw their stock prices rise 2.8%.”

INSUFFICIENT EVIDENCE

No evidence was found after searching for the claim regarding the 2.8% rise in stock prices.

info

Claim 8: “During the rest of 2013, compared with other companies, the affected ones: Increased their overall leverage by an average 3.1 percentage points.”

SINGLE SOURCE

The provided evidence for this claim consists of general definitions of 'remainder' and does not contain the specific financial data regarding the 3.1 percentage point increase in leverage.

travel_explore

web search NEUTRAL — In mathematics, the remainder is the amount "left over" after performing some computation. In arithmetic, the remainder is the integer "left over" after dividing one integer by another to produce an i…
https://en.m.wikipedia.org/wiki/Remainder

travel_explore

web search NEUTRAL — The remainder for real numbers When and are real numbers, with being non-zero, then can be divided by without remainder, with the quotient being another real number. If the quotient is constrained to …
https://simple.m.wikipedia.org/wiki/Remainder

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web search NEUTRAL — Use the remainder calculator to find the quotient and remainder of division.
https://www.omnicalculator.com/math/remainder

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Claim 9: “new research from the McCombs School of Business at The University of Texas at Austin... shows that by defining a company's risk level, agencies can sway some of its business decisions.”

CORROBORATED

Multiple web search results confirm that research (specifically by Gregory Weitzner and Cesare Fracassi) shows that Moody's rating methodology changes influenced corporate borrowing decisions. The McCombs School of Business is confirmed as a research entity at UT Austin.

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wikipedia NEUTRAL — Benjamin C. Ayers (born July 17, 1965) is an American academic administrator and accounting professor who is the 16th president of Clemson University in Clemson, South Carolina. He assumed office on A…
https://en.wikipedia.org/wiki/Ben_Ayers

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wikipedia NEUTRAL — Hugh E. "Skip" McGee III (born 1959) is an American investment banker who was formerly a senior executive at Lehman Brothers and Barclays. He is presently co-founder and chief executive officer of Int…
https://en.wikipedia.org/wiki/Hugh_"Skip"_McGee_III

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wikipedia NEUTRAL — The McCombs School of Business (McCombs School or McCombs) is the business school at the University of Texas at Austin, a public research university in Austin, Texas. In addition to the main campus in…
https://en.wikipedia.org/wiki/McCombs_School_of_Business

+ 3 more evidence sources

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Claim 10: “But in July 2013, Moody's changed that rule for companies below investment grade... it classified their preferred stock as 100% equity.”

CORROBORATED

Multiple sources (SSRN and Gregory Weitzner's research page) explicitly state that in July 2013, Moody's increased the equity credit for preferred stock from 50% to 100% for speculative-grade (below investment grade) firms.

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wikipedia NEUTRAL — Moody's, previously known as Moody's Analytics, is a subsidiary of Moody's Corporation established in 2007 to focus on non-rating activities, separate from Moody's Investors Service. It provides econo…
https://en.wikipedia.org/wiki/Moody's_Analytics

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wikipedia NEUTRAL — Moody's Corporation is an American business and financial services company. It is the holding company for Moody's Ratings (previously known as Moody's Investors Service), an American credit rating age…
https://en.wikipedia.org/wiki/Moody's_Corporation

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wikipedia NEUTRAL — Moody's Ratings is the credit ratings division of Moody's Corporation. It was known as Moody's Investors Service until March 2024, when the unit was rebranded as Moody's Ratings. Moody's Ratings provi…
https://en.wikipedia.org/wiki/Moody's_Ratings

+ 3 more evidence sources

info Disclaimer: This analysis is generated by AI and should be used as a starting point for critical thinking, not as definitive truth. Claims are verified against publicly available sources. Always consult the original article and additional sources for complete context.