| dc.description.abstract | Increasing varieties of instruments and the growth of financial market created not
only the opportunities for the investors but also complexities in the market. To
reduce the complexity of financial instruments, to facilitate the investors to take
informed investment decisions and to enable the companies to mobilize the required
funds, various credit rating agencies emerged across the globe. Credit rating denotes
an independent opinion of an agency on the issuer’s capability to repay its financial
commitments. Rating agencies evaluate the firm’s business position, industry and
competitive factors, strategic programs and thereby provide reliable assessments of
firm’s financial creditworthiness over the foreseeable future. The availability of
clear and accepted indicators of the risk of default helps investors to make
investment decision. Even though the credit rating helps the investors to take
investment decision, there are number of occasions of failure to make timely
prediction and inbuilt problem with credit rating system. The failure of the rating
system was noticeable during the 2008 financial crisis, the Enron scandal in 2001,
the collapse of Kingfisher Airlines, DHFL, Eros, Suzlon Energy, Amtek Auto, Zee
Group, RCom, and most recently IL&FS. The expanding business of CRAs and the
close relationship between issuers' managing directors and CRAs' management may
also be contributing factors. In India, there is a growing perception that CRAs have
become overly generous in awarding ratings, raising concerns about their
authenticity, honesty, and utility. By doing so, CRAs have not only lost the trust of
investors but also their credibility. The present study examines the awareness and
perception of investors towards credit rating and its influence on their investment
decision. The present study is descriptive and analytical in nature. The study is based
on both primary and secondary data. Primary data is collected from equity investors
in Kerala using questionnaire. Secondary data required for the study were compiled
from official website of CRISIL, ICRA, CARE and SEBI, research dissertation and
thesis, periodicals, study report, books related to study area, journals and other
websites. 400 equity investors from six selected districts in Kerala were selected for
the study. The pilot study and pre-test were conducted to check the validity, reliability, and normality requirements. The primary data have been analyzed using
statistical tools such as percentage analysis, mean, standard deviation, Levene’s test
of Homogeneity of Variance, Independent Sample ‘t’ test, One-way ANOVA,
Tukey HSD Post-hoc test for Multiple Comparison, Chi square test. Furthermore,
Confirmatory Factor Analysis and Structural Equation Modelling are used as the
statistical techniques to identify the relationships and measurement models of the
variables respectively. The report of the research work is presented in nine chapters.
Research indicates a potential need for increased transparency efforts and better
communication between Credit rating agencies and investors to strengthen trust and
understanding in the industry. Educating investors about CRA methodologies and
their working can contribute to a more informed and confident investor base when
engaging with credit rating agencies. The investors are also to be educated on how to
make the decisions by using rating. The investors point out that that there is a need
for periodic rating revisions. The respondents are concerned about the negative
impact of downgrading and frequent rating changes on a company's image and
investor confidence. Results suggest that while some believe in the usefulness of
ratings in investment decisions, there's a more mixed opinion regarding their impact
on market efficiency and market-moving potential. The findings underscore the
importance of clear and well-explained rating practices in maintaining investor
confidence also highlighting the varied perspectives on the immediate market impact
of rating announcements. The SEM model proposed for testing the impact of
Awareness on different dimensions of Perception demonstrates that there is
significant positive causal relationship between the Awareness of investors and their
Perception related to credit rating. The findings denote that there is no significant
but positive influence of investors’ awareness on credit rating and their Investment
Decision based on credit rating. Further, it shows that there is significant positive
causal relationship between the Perception of investors and their Investment
Decision related to credit rating. The study provides implications for Regulators,
Credit Rating Agencies and investors. | en_US |
