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1 Eur. J. Cont. Econ. & Mgmt. 64 (2014)
The Impact of Positive Cash Operating Activities on the Cost of Debt International Evidence

handle is hein.journals/ejelp1 and id is 272 raw text is: European Journal of Contemporary Economics and Management December 2014 Edition Vol.1 No.2 THE IMPACT OF POSITIVE CASH OPERATING ACTIVITIES ON THE COST OF DEBT INTERNATIONAL EVIDENCE Dr. Saadani Ghali Harit Satt Universite Sidi Mohamed Ben Abdellah Faculte des Sciences Juridiques,, Economiques et Sociales - FES, Maroc School of Business Administration, Al Akhawayn University, Ifrane Doi: 10.19044/elp.v1no2a5 URL:http://dxdoi.org/10.19044/elpvlno2a5 Abstract This paper identifies the affiliation between the ending cash balance of the operating section in the cash flow statement and the bonds ratings. Our sample includes 600 companies from 26 countries. The study was conducted over a period of 18 years. An Ordered Probit regression analysis had been applied to identify how the positive cash balance of the operating section in the cash flow statement shapes the probability of escalating the bonds ratings. We find burly proof that the positive operating cash balance considerably affects the bonds ratings. In other words, when a company is able to generate enough cash from its main operating activities, the likelihood of having higher bonds ratings raises; this entails a low cost of debt since higher bond ratings have been proven to lessen the company's cost for raising funds (in the form of bonds). The results add more confirmation to the creditors' rights shields and how it affects the cost of debt. Keywords: Credit ratings, operating cash position, default risk Introduction Information is the key to efficient functioning of the stock markets. Securities get priced correctly when the relevant information about companies get incorporated into the prices. Financial analysts play an important role in this process by bringing out new information about companies. Under normal circumstances, Stakeholders and more precisely creditors view analysts' research reports, forecasts, and recommendations as relatively accurate sources of information and use them in their rating 64

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