|
| |
| Magnus Blomkvist, Johannes Kortekangas and Hitesh Vyas |
| |
| ''Credit rating levels and acquisitions: the European evidence'' |
| ( 2021, Vol. 41 No.2 ) |
| |
| |
| This study examines the impact of credit rating levels on acquisitions in Europe. In line with a financial constraints explanation, we find that improving the credit rating level by one notch increases the acquisition likelihood by 1.87pp or 8.1% (from baseline estimates). As the rating level further increases, firms begin to forego acquisition opportunities resulting in an inverse U-shaped relation between credit rating levels and acquisitions. The pattern is consistent with that high rated firms manage their credit rating levels by mitigating acquisition-induced downgrades. Overall, our results imply that European managers give relevance to their credit rating and that higher ratings relaxes financial constraints facilitating acquisitions. |
| |
| |
| Keywords: Mergers and acquisitions, Credit ratings, Financial constraints |
JEL: G3 - Corporate Finance and Governance: General
G2 - Financial Institutions and Services: General |
| |
| Manuscript Received : Aug 11 2020 | | Manuscript Accepted : Apr 09 2021 |
|
