Credit ratings and acquisitions

Aktas, N, Petmezas, D, Servaes, H and Karampatsas, N (2021) Credit ratings and acquisitions. Journal of Corporate Finance. ISSN 0929-1199 (In Press) OPEN ACCESS


There is a curvilinear relation between credit ratings and acquisitions. Non-investment grade firms make more acquisitions as their ratings improve, consistent with the relaxation of financial constraints. However, this pattern reverses for investment grade firms, supporting the view that such firms want to preserve their rating and are concerned about acquisition-related downgrades. Abnormal returns first decrease and then increase as ratings improve. In support of these findings, acquisitions have a negative impact on future ratings only for highly-rated firms. These results indicate that the level of a firm’s credit rating has a significant impact on the acquisition process.

More Details

Item Type: Article
Subject Areas: Finance
Additional Information:

© 2021 Elsevier. This manuscript version is made available under the CC-BY-NC-NC licence

Date Deposited: 02 Jun 2021 10:18
Date of first compliant deposit: 26 May 2021
Subjects: Credit management
Mergers and acquisitions
Rates and rating
Last Modified: 14 Jun 2024 00:43

Export and Share


Accepted Version - Text
  • Available under License


View details on Dimensions' website

Downloads from LBS Research Online

View details

Actions (login required)

Edit Item Edit Item