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Do Credit Ratings Really Affect Capital Structure?
Author(s) -
Kemper Kristopher J.,
Rao Ramesh P.
Publication year - 2013
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/fire.12016
Subject(s) - scrutiny , capital structure , affect (linguistics) , order (exchange) , economics , credit rating , capital (architecture) , business , finance , monetary economics , debt , psychology , communication , archaeology , political science , law , history
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.