External Credit Ratings and Bank Lending

39 Pages Posted: 20 Nov 2017 Last revised: 30 Aug 2018

See all articles by Christophe Cahn

Christophe Cahn

Banque de France - Direction des Entreprises

Mattia Girotti

Banque de France

Federica Salvadè

PSB Paris School of Business

Multiple version iconThere are 3 versions of this paper

Date Written: August 28, 2018

Abstract

We study how third-party rating information influences firms' access to bank financing and real outcomes. We exploit a refinement in the rating scale that occurred in France in 2004. The new rules made some firms within each rating class receive a positive rating surprise. We find that such firms enjoy greater and cheaper access to bank credit. In particular, they obtain more credit from previously less informed lenders, and start new bank relationships more easily. Consequently, they rely on equity to a lower extent and invest more. These findings suggest that credit ratings help reducing the hold-up problem and increase competition among banks.

Keywords: Credit Ratings, Banks, Lending Technology, Corporate Financing, Real Effects, Hold-up problem

JEL Classification: G21, G32

Suggested Citation

Cahn, Christophe and Girotti, Mattia and Salvadè, Federica, External Credit Ratings and Bank Lending (August 28, 2018). Available at SSRN: https://ssrn.com/abstract=3072891 or http://dx.doi.org/10.2139/ssrn.3072891

Christophe Cahn

Banque de France - Direction des Entreprises ( email )

39 rue Croix des Petits Champs
Paris Cedex 01 75049
France

Mattia Girotti (Contact Author)

Banque de France ( email )

Paris
France

Federica Salvadè

PSB Paris School of Business ( email )

59 rue Nationale
Paris, 75013
France

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