Overview
- Provides an overview of recent developments in ratings methodology
- Analyses the methodological and systemic shortcomings of the current credit ratings of non-financial issuers
- Describes the advantages and shortcomings of both quantitative and qualitative methods for determining the creditworthiness of issuers
Part of the book series: Contributions to Finance and Accounting (CFA)
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Table of contents (20 chapters)
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Front Matter
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Corporate Finance Theories Used in Ratings and in Rating Methodologies
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Front Matter
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Ratings and Rating Methodologies of Non-financial Issuers
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Front Matter
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Project Ratings
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Front Matter
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New Meaningful Effects in Modern Capital Structure Theory (BFO Theory) Which Should Be Accounting in Rating Methodologies
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Front Matter
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Keywords
About this book
This book presents new methodologies for rating non-financial issuers and project ratings based on the BFO (Brusov-Filatova-Orekhova) theory of capital cost and structure, and its perpetuity limit (Modigliani-Miller theory), as well as modern investment models created by the authors.
It first provides a critical analysis of the methodological and systemic shortcomings of the current credit ratings of non-financial issuers and project ratings. In order to increase the objectivity and accuracy of rating assessments, it then modifies the BFO theory for companies of arbitrary age as well as and the perpetuity limit (Modigliani-Miller theory) for rating needs. The authors also incorporate the financial indicators used in the rating methodology into both the BFO theory and the Modigliani-Miller theory. Within the framework of the modified BFO theory for rating needs, they then present a detailed study of the dependence of the weighted average cost of capital of WACC, used asthe discount rate for discounting financial flows, on the financial ratios used in the rating, on the age of the company, on the leverage level and on the level of taxation for a wide range of values of equity cost and debt cost for companies of arbitrary age. This makes it possible to correctly assess of the discount rate, taking into account the values of financial ratios.
The use of well-established corporate finance theories (BFO theory and its perpetuity limit) opens up new horizons in the rating industry, providing an opportunity to switch from mainly qualitative methods for determining the creditworthiness of issuers to mainly quantitative methods in rating, and as such improving the quality and accuracy of rating scores.
Authors and Affiliations
About the authors
Petr Nickitovich Brusov is professor at the Financial University under the Government of the Russian Federation (Moscow)He has been a visiting Professor of Northwestern University (USA), Cornell University (USA) and Osaka City University (Japan) among other places. He is the author of over 500 research publications including six monographs, numerous textbooks and articles.
Tatiana Filatova is professor at the Financial University under the Government of the Russian Federation (Moscow). In the past 20 years, she has been dean of the faculties of financial management, management, state and municipal government at the Financial University. Tatiana Filatova is the author of over 250 research publications including five monographs, numerous textbooks and articles.
Natali Orekhova is professor of the Center of Corporate Finance, Investment, Taxation and Rating at the Southern Federal University, Rostov-on-Don, Russia. She has been a leading scientist of the FinancialUniversity under the Government of the Russian Federation. She is the author of over 100 research publications including three monographs, numerous textbooks and articles.
Bibliographic Information
Book Title: Ratings
Book Subtitle: Critical Analysis and New Approaches of Quantitative and Qualitative Methodology
Authors: Peter Brusov, Tatiana Filatova, Natali Orekhova
Series Title: Contributions to Finance and Accounting
DOI: https://doi.org/10.1007/978-3-030-56243-4
Publisher: Springer Cham
eBook Packages: Business and Management, Business and Management (R0)
Copyright Information: The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021
Hardcover ISBN: 978-3-030-56242-7Published: 05 December 2020
Softcover ISBN: 978-3-030-56245-8Published: 05 December 2021
eBook ISBN: 978-3-030-56243-4Published: 04 December 2020
Series ISSN: 2730-6038
Series E-ISSN: 2730-6046
Edition Number: 1
Number of Pages: XII, 369
Number of Illustrations: 158 b/w illustrations, 31 illustrations in colour
Topics: Business Finance, Financial Services, Capital Markets