The impact of credit ratings on the decision-making process behind capital structures
Autor(a) principal: | |
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Data de Publicação: | 2020 |
Tipo de documento: | Dissertação |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10400.14/29859 |
Resumo: | The role of credit ratings in influencing capital structure decisions has generated a lot of discussion. This thesis intends to examine whether credit ratings directly impact the marginal financing behaviors of U.S. firms. Kisgen (2006) engaged in an earlier seminal discussion of this topic. His arguments on the discrete costs associated with credit rating levels suggest that firms near a credit rating change issue less debt relative to equity than firms farther away from a rating change. This concept became henceforth known as the Credit Rating-Capital Structure (CR-CS) hypothesis. Through the empirical analysis of 14,037 firm-years between 2001 and 2017, our work confirms Kisgen’s (2006) findings that firms with a plus or minus rating have a propensity to use less debt relative to equity, than firms in the middle, supporting the CR-CS hypothesis. However, this significance seems to be mainly driven by the minus designation. Therefore, firms with an upgrade potential do not appear to significantly adjust their debt issuing patterns. Moreover, we confirm that firms are typically most concerned about broad rating levels, in which the access to the commercial paper is affected. Lastly, we find that credit ratings have a significant effect on capital structures, both during and prior to the financial crisis periods. Overall, we provide evidence that the potential costs of downgrades directly impact capital structure decisions, and managers are thus likely to be concerned with ratings-triggered costs. |
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The impact of credit ratings on the decision-making process behind capital structuresCredit ratingCapital structureCR-CS hypothesisRating de créditoEstrutura de capitaisHipótese CR-CSDomínio/Área Científica::Ciências Sociais::Economia e GestãoThe role of credit ratings in influencing capital structure decisions has generated a lot of discussion. This thesis intends to examine whether credit ratings directly impact the marginal financing behaviors of U.S. firms. Kisgen (2006) engaged in an earlier seminal discussion of this topic. His arguments on the discrete costs associated with credit rating levels suggest that firms near a credit rating change issue less debt relative to equity than firms farther away from a rating change. This concept became henceforth known as the Credit Rating-Capital Structure (CR-CS) hypothesis. Through the empirical analysis of 14,037 firm-years between 2001 and 2017, our work confirms Kisgen’s (2006) findings that firms with a plus or minus rating have a propensity to use less debt relative to equity, than firms in the middle, supporting the CR-CS hypothesis. However, this significance seems to be mainly driven by the minus designation. Therefore, firms with an upgrade potential do not appear to significantly adjust their debt issuing patterns. Moreover, we confirm that firms are typically most concerned about broad rating levels, in which the access to the commercial paper is affected. Lastly, we find that credit ratings have a significant effect on capital structures, both during and prior to the financial crisis periods. Overall, we provide evidence that the potential costs of downgrades directly impact capital structure decisions, and managers are thus likely to be concerned with ratings-triggered costs.O papel que o rating de crédito tem nas decisões da estrutura de capitais das empresas tem gerado uma larga discussão. Esta tese analisa em que medida o rating influencia diretamente a escolha da estrutura de capitais das empresas norte americanas. Kisgen (2006), estreia-se neste campo de análise desenvolvendo a hipótese CR-CS. O autor afirma que, devido à existência de custos associados aos níveis de rating, as empresas próximas de uma variação de rating tendem a emitir menos dívida relativamente a capitais próprios, face a empresas que não estão próximas desta variação. Através de uma análise empírica de 14,037 empresas-anos entre 2001 e 2017, confirmamos os resultados de Kisgen (2006) de que, empresas com um mais ou um menos no seu rating, têm uma menor propensão para usar dívida face a capitais próprios, do que aquelas que não estão em vias de sofrer alteração, suportando a hipótese CR-CS. Contudo, a significância destes testes parece estar maioritariamente associada ao coeficiente com um menos no seu rating. Deste modo, empresas com um potencial de upgrade tendem a não ajustar os seus padrões de emissão de dívida. Confirmamos, também, que as empresas preocupam-se principalmente com níveis de rating cujo acesso ao mercado do papel comercial está em causa. Por fim, validamos a hipótese CR-CS nos períodos pré-crise e crise financeira. Em geral, os resultados sugerem que os custos implícitos numa descida do rating impactam diretamente as decisões de estrutura de capital, facto que se afigura como fator de preocupação acrescido para os gestores.Bonfim, Diana Carina Ribeiro GuimarãesVeritati - Repositório Institucional da Universidade Católica PortuguesaGomes, Joana de Oliveira2020-03-06T09:41:05Z2020-01-2920202020-01-29T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/masterThesisapplication/pdfhttp://hdl.handle.net/10400.14/29859TID:202440893enginfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-07-12T17:35:24Zoai:repositorio.ucp.pt:10400.14/29859Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T18:23:59.918736Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
The impact of credit ratings on the decision-making process behind capital structures |
title |
The impact of credit ratings on the decision-making process behind capital structures |
spellingShingle |
The impact of credit ratings on the decision-making process behind capital structures Gomes, Joana de Oliveira Credit rating Capital structure CR-CS hypothesis Rating de crédito Estrutura de capitais Hipótese CR-CS Domínio/Área Científica::Ciências Sociais::Economia e Gestão |
title_short |
The impact of credit ratings on the decision-making process behind capital structures |
title_full |
The impact of credit ratings on the decision-making process behind capital structures |
title_fullStr |
The impact of credit ratings on the decision-making process behind capital structures |
title_full_unstemmed |
The impact of credit ratings on the decision-making process behind capital structures |
title_sort |
The impact of credit ratings on the decision-making process behind capital structures |
author |
Gomes, Joana de Oliveira |
author_facet |
Gomes, Joana de Oliveira |
author_role |
author |
dc.contributor.none.fl_str_mv |
Bonfim, Diana Carina Ribeiro Guimarães Veritati - Repositório Institucional da Universidade Católica Portuguesa |
dc.contributor.author.fl_str_mv |
Gomes, Joana de Oliveira |
dc.subject.por.fl_str_mv |
Credit rating Capital structure CR-CS hypothesis Rating de crédito Estrutura de capitais Hipótese CR-CS Domínio/Área Científica::Ciências Sociais::Economia e Gestão |
topic |
Credit rating Capital structure CR-CS hypothesis Rating de crédito Estrutura de capitais Hipótese CR-CS Domínio/Área Científica::Ciências Sociais::Economia e Gestão |
description |
The role of credit ratings in influencing capital structure decisions has generated a lot of discussion. This thesis intends to examine whether credit ratings directly impact the marginal financing behaviors of U.S. firms. Kisgen (2006) engaged in an earlier seminal discussion of this topic. His arguments on the discrete costs associated with credit rating levels suggest that firms near a credit rating change issue less debt relative to equity than firms farther away from a rating change. This concept became henceforth known as the Credit Rating-Capital Structure (CR-CS) hypothesis. Through the empirical analysis of 14,037 firm-years between 2001 and 2017, our work confirms Kisgen’s (2006) findings that firms with a plus or minus rating have a propensity to use less debt relative to equity, than firms in the middle, supporting the CR-CS hypothesis. However, this significance seems to be mainly driven by the minus designation. Therefore, firms with an upgrade potential do not appear to significantly adjust their debt issuing patterns. Moreover, we confirm that firms are typically most concerned about broad rating levels, in which the access to the commercial paper is affected. Lastly, we find that credit ratings have a significant effect on capital structures, both during and prior to the financial crisis periods. Overall, we provide evidence that the potential costs of downgrades directly impact capital structure decisions, and managers are thus likely to be concerned with ratings-triggered costs. |
publishDate |
2020 |
dc.date.none.fl_str_mv |
2020-03-06T09:41:05Z 2020-01-29 2020 2020-01-29T00:00:00Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/masterThesis |
format |
masterThesis |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10400.14/29859 TID:202440893 |
url |
http://hdl.handle.net/10400.14/29859 |
identifier_str_mv |
TID:202440893 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
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info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
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Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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RCAAP |
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RCAAP |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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