It’s better to provide too much credit information
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As the Facade and Blind Spot grow smaller through self-disclosure and providing feedback, the Arena expands.With mutual disclosure, the Unknown area shrinks as well. The goal of positive communication is to expand the Arena by learning more about yourself from others’perspectives and sharing more information that may be unknown to others. In this way,more information is passed back and forth between you—creating new opportunities for synergy and creativity. The second tool is the Self-Disclosure Checklist (Exercise 1). We typically don’t give much thought to how well we self-disclose information to others. The Self-Disclosure Checklist provides you with an opportunity to reflect on how well you do this vital activity. The more honestly you can answer the questions, the more insights you will have into your ability to self-disclose information about yourself.
If you answer yes to three or more of the questions in the checklist, you may want to think about how freely you disclose information about yourself. While it isn’t appropriate to share everything about your life, self-disclosure is essential in a partnership. The greater the self-disclosure, the more information flows and the more trust is established. It’s better to provide too much information about yourself than not enough.
One typical reason for spread differentials between bonds of the same rating are liquidity considerations, particularly with respect to stress situations. Generally, bonds with a large issue size, issued recently and actively traded by several market makers tend to be the most liquid. Sometimes old bonds with a small issue size, too, trade at rather tight levels. This is often the case for typical “CDO (Collateralized debt obligations) names”, that is bonds that are often included when CDOs are set up. Another reason for wide spread differentials between issuers with similar credit quality is that many market participants are concerned with potential mark-to-market losses. Therefore, rather illiquid and more volatile bonds require a higher spread, even if spread volatility is rather due to market technicals than uncertainty regarding company fundamentals. Consequently, it is natural that credit spreads differ even for bonds and issuers with the same rating.
One example from the automotive sector is the large spread differential between Ford and Renault bonds with similar coupon and maturity. Although the rating agencies assign approximately the same credit risk to both issuers, investors view the risk that is related to owning Ford bonds as significantly higher. Our study clearly outlines that Ford bonds have been much more volatile than Renault bonds between September 2003 and February 2004. When S&P put Ford on credit watch negative on October 21, 2003, spreads widened massively. Even if only very few investors feared a multiple notch downgrade of Ford from the then BBB rating, a 1 notch downgrade to BBB coupled with a negative outlook would have caused concerns about a later downgrade of Ford into high-yield. There were fears
Coca-Cola introduced new Coke after taste tests proved it more popular than Pepsi and the original Coke. However, the launch of new Coke contained an untested assumption: that flavour mattered more than image. The information gathered built upon this flawed notion, confirming the decision that classic Coke needed to be replaced. This view was contrary to what customers – past, present and future – actually wanted. Interestingly, this goodwill was so powerful that the cause of the company’s failure was also the source of its salvation, as consumers forgave Coca- Cola and realised that they appreciated classic Coke, or else tried it for the first time.