Do Credit Ratings Really Affect Capital Structure?

23 Pages Posted: 11 Oct 2013

See all articles by Kristopher Kemper

Kristopher Kemper

Ball State University

Ramesh P. Rao

Oklahoma State University - Stillwater - Spears School of Business - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: November 2013

Abstract

This paper revisits recent investigations into the role credit ratings play in the marginal financing behavior of firms. Although it has long been documented that credit ratings may be an important determinant of firm capital structure policy, academics have only recently subjected this motivation to empirical scrutiny. We add to the brief existing literature by investigating the sensitivity of marginal financing behavior of firms to a number of attributes deemed to capture firms’ affinity to emphasize credit ratings in their financing behavior. Our results suggest that credit ratings are not a first‐order concern in capital structure decisions.

Keywords: capital structure, credit ratings

JEL Classification: G24, G32

Suggested Citation

Kemper, Kristopher and Rao, Ramesh P., Do Credit Ratings Really Affect Capital Structure? (November 2013). Financial Review, Vol. 48, Issue 4, pp. 573-595, 2013. Available at SSRN: https://ssrn.com/abstract=2338850 or http://dx.doi.org/10.1111/fire.12016

Kristopher Kemper (Contact Author)

Ball State University ( email )

Miller College of Business
Whitinger Business Building
Muncie, IN 47306
United States
765-285-5200 (Phone)

Ramesh P. Rao

Oklahoma State University - Stillwater - Spears School of Business - Department of Finance ( email )

Spears School of Business
Stillwater, OK 74078-4011
United States
405-744-1385 (Phone)
405-744-5180 (Fax)

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