Work from Home Suitability and Credit Risk Assessment
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Date
2023-07-07
Open Access Location
Journal Title
Journal ISSN
Volume Title
Publisher
Taylor and Francis Group
Rights
(c) 2023 The Author/s
CC BY-NC-ND 4.0
CC BY-NC-ND 4.0
Abstract
Employing firm-level work from home (WFH) suitability derived from the U.S. universe job postings, we investigate whether rating agencies and debt holders incorporate WFH suitability in their risk assessments. We document that firms with higher WFH suitability have higher credit ratings and lower costs of debt. Our results are robust to different fixed effect estimations, sampling methods, and controls. We identify two ways that WFH suitability translates into higher credit ratings: high WFH suitability is associated with lower future cash flow volatility and lower default risk. Overall, our study suggests that WFH suitability is an important determinant of credit risk assessments and that firms should see flexible work arrangements as an effective strategy in their crisis management planning.
Description
Keywords
Work from home, Credit rating, Default risk
Citation
Nguyen H, Pham MH, Truong C. (2023). Work from Home Suitability and Credit Risk Assessment. European Accounting Review. Latest Articles. (pp. 1-34).