Managerial Economics Research Paper Example | Topics and Well Written Essays - 2250 words

Managerial Economics - Research Paper Example (Heakal, n. d). As each company or country will have both advantages as well as risks regarding many aspects of its functioning, it is very important for the investors to have insight about those investment opportunities. As it will not be practically feasible for the investors to analyze and understand each and every aspect of the companies or countries and their advantages and risks, they will elicit the help of external agencies. Also, even if they do analysis on their own, they will consult or refer external agencies to give them some guidelines or ideas about the investment opportunities. This is where the role of credit rating companies or agencies comes into the picture. â€Å"Measuring the ability and willingness of an entity - which could be a person, a corporation, a security or a country - to keep its financial commitments or its debt, credit ratings are essential tools for helping you make some investment decisions.† (Heakal, n. d). Do changes in credit ratings affect equity valuation? If so how? And to what extent? This is an important topic that has interested many professionals in the field of economics and business, although it is often overlooked. As pointed out in the introduction, credit rating companies play an extremely vital role in any economy, local or foreign. The information provided by these agencies is used by all kind of parties starting from business organizations, independent investors, financial institutions, even countries’ governments, charity organizations, etc. â€Å"Only because of the availability of clear, internationally accepted indicators of the risk of default were investors willing to invest in international securities—whether corporate or government bonds—whose credit quality they would have been virtually unable to assess on their own.† (Utzig, 2010). The objectives of this research paper are: firstly, to show how credit rating companies’ rati ngs or changes have