Citation

Discussion Paper Details

Please find the details for DP10719 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Credit Ratings and Acquisitions

Author(s): Nihat Aktas, Nikolaos Karampatsas, Dimitris Petmezas and Henri Servaes

Publication Date: July 2015

Keyword(s): credit rating, financial constraints and mergers & acquisitions

Programme Area(s): Financial Economics

Abstract: We document a curvilinear relation between credit ratings and acquisitions, where acquisitiveness first goes up and then down as credit ratings increase, with a maximum around the A minus threshold. This pattern is broken by firms around the high-yield cut-off, which are more reluctant to make acquisitions. The increase in acquisitiveness at low rating levels is accompanied by lower announcement returns. Acquisitions have a negative impact on credit ratings, even after controlling for all the characteristics potentially influenced by the transaction itself, and especially for mergers that are poorly received by the stock market. This work suggests that a firm?s credit rating exerts substantial influence on the acquisition process and that rating agencies pay particular attention to acquisitions when deciding on the creditworthiness of firms.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10719

Bibliographic Reference

Aktas, N, Karampatsas, N, Petmezas, D and Servaes, H. 2015. 'Credit Ratings and Acquisitions'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10719