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Article Dans Une Revue Economics Bulletin Année : 2021

Credit Rating Levels and Acquisitions: The European Evidence

Magnus Blomkvist
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Hitesh Vyas
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Résumé

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.
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Dates et versions

hal-03196701 , version 1 (13-04-2021)

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  • HAL Id : hal-03196701 , version 1

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Magnus Blomkvist, Johannes Kortekangas, Hitesh Vyas. Credit Rating Levels and Acquisitions: The European Evidence. Economics Bulletin, 2021. ⟨hal-03196701⟩

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