This study examines whether better corporate governance is associated with higher credit ratings. Moreover, it investigates whether better corporate governance strengthens the positive association between earnings and credit ratings. This study makes use of the quantified corporate governance scores (CG score) as computed by the Korea Corporate Governance Service which provides separate CG scores based on five categories (shareholder rights, board of directors,disclosure, audit scheme and dividend policy) along with an overall total CG score. As for the credit ratings, corporate bond ratings were considered. After imposing the data requirement,the final sample used for this study results in 956 firm-year observations based on firms listed in the Korean Stock Exchange from 2003 to 2009. For analyses purposes, this study employs OLS and clustered-adjusted ordered probit regressions. Even after controlling for possible factors that might influence credit ratings, we find that higher corporate governance scores are associated with higher credit ratings. This result does not only apply to the overall total CG score, but also when the five corporate governance categories were considered individually which suggests that rating agencies award higher credit ratings to firms with better corporate governance. In examining the effect of corporate governance on the association between earnings and credit ratings, we find no evidence that a higher overall total CG score strengthens the positive association between earnings and credit ratings. However, when each of the five corporate governance categories were considered individually, we find that a higher CG score related to disclosure and audit scheme is associated with a stronger positive relation between earnings and credit ratings. This suggests that rating agencies perceive earnings reported by firms with better corporate governance related to disclosure and audit scheme to be of higher quality which are ultimately translated into higher credit ratings. The Korean Securities Law distinguishes between firms with total assets less than and more than 2 trillion KRW by imposing different requirements regarding the fraction of outside directors. Since this unique regulatory setting could result in significantly higher corporate scores for firms whose total assets exceed 2 trillion KRW than for firms whose total assets are below 2 trillion KRW, this study conducts additional analyses by dividing the total sample into firms with total assets less than and more than 2 trillion KRW. When considering the overall total CG score we are able to confirm our result that a higher CG score is associated with higher credit ratings for both subsamples. When the five corporate governance categories were considered individually, however, we find that some corporate governance categories affect credit ratings differently depending on the size of total assets. Specifically, the results show that rating agencies consider corporate governance related to disclosure and audit scheme as important for the subsample of firms with total assets less than 2 trillion, whereas corporate governance related to the board of directors is considered as important for the subsample of firms with total assets more than 2 trillion. Corporate governance related to shareholder rights and dividend policy appear to be evaluated in the same manner by rating agencies regardless of the size of total assets. Rating agencies may interpret earnings management through discretionary accruals as degrading the quality of a firm’s earnings. In other words, discretionary accruals might directly influence the quality of earnings. As a robustness test, this study, thus, also examines the effect of corporate governance on the association between earnings and credit ratings by dividing the total sample into firms with positive and negative discretionary accruals. We do not obtain significant results when considering the overall total CG score. When the five corporate governance categories were considered individually, however, we find that some corporate governance categories affect credit ratings differently depending on the degree of earnings management as measured by discretionary accruals. In particular, for firms with negative discretionary accruals (i.e. firms with smaller degrees of earnings management) rating agencies associate better corporate governance related to disclosure and audit scheme with higher earnings quality which translates into higher credit ratings. On the other hand, firms with positive discretionary accruals (i.e. firms with greater degrees of earnings management) and better corporate governance related to dividend policy are perceived to induce lower credit ratings. A possible explanation is that high levels of earnings in such firms are expected to be paid out as dividends rather than reinvested in the firm which is negatively perceived by the rating agencies. Our empirical results make academic and practical contributions. Academically, we have shown that better corporate governance is associated with higher credit ratings and that rating agencies perceive earnings reported by firms with better corporate governance related to disclosure and audit scheme to be of higher quality which are ultimately translated into higher credit ratings. This finding has important implications for practitioners as well in the course of firm valuation by shedding light on how corporate governance is accounted for in credit ratings.