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Credit Ratings and Acquisitions

Aktas, N, Karampatsas, N, Petmezas, D and Servaes, H (2015) Credit Ratings and Acquisitions [Working Paper]

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We document a curvilinear relation between credit ratings and acquisitions. Acquisitions first increase and then decrease as ratings improve, with a high around the A− threshold. The increase at low rating levels is accompanied by lower announcement returns. Acquisitions have a negative impact on future ratings for highly-rated firms, and a positive impact for firms with low ratings, even after controlling for all the characteristics potentially influenced by the transaction. These results indicate that credit ratings exert substantial influence on the acquisition process, and that rating agencies pay particular attention to acquisitions when deciding on the creditworthiness of firms.

Item Type: Working Paper
Subjects : Finance
Divisions : Faculty of Arts and Social Sciences > School of Economics
Authors :
Aktas, N
Karampatsas, N
Petmezas, D
Servaes, H
Date : 18 November 2015
DOI : 10.2139/ssrn.2625736
Copyright Disclaimer : Author's accepted manuscript submitted to SSRN in November 2015.
Uncontrolled Keywords : credit ratings, acquisitions, financial constraint, takeover aversion
Related URLs :
Depositing User : Symplectic Elements
Date Deposited : 29 Jul 2016 14:03
Last Modified : 31 Oct 2017 18:28

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