Credit rating levels and acquisitions: the European evidence

Magnus Blomkvist (), Johannes Kortekangas () and Hitesh Vyas ()
Additional contact information
Magnus Blomkvist: Audencia Business School - Nantes
Johannes Kortekangas: Hanken School of Economics, Gasum
Hitesh Vyas: Audencia Business School - Nantes

Economics Bulletin, 2021, vol. 41, issue 2, 222-233

Abstract: 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 (search for similar items in EconPapers)
JEL-codes: G2 G3 (search for similar items in EconPapers)
Date: 2021-04-09
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2021/Volume41/EB-21-V41-I2-P21.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-20-00807

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().