Do rated firms outperform non-rated peers in the Gulf Co-operation Council region?

Abstract

This paper examines the financial performance of rated and non-rated listed firms in the Gulf Co-operation Council (GCC) region. It also examines the relationship between financial performance and leverage of rated and non-rated firms. We expect a difference in the financial performance of rated and non-rated firms. The sample consists of 105 rated and an equally-matched sample of non-rated firms in the GCC region. Our parametric t -tests indicate that there are statistically significant differences in leverage and equity multiplier of rated and non-rated firms; but there are no differences in capital intensity, profit margin, earnings per share, and fixed assets intensity of the two groups. Results from multiple cross-sectional panel regression tests indicate that there is a statistically significant relationship between leverage and all the financial performance measures, except for profit margin.