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Credit ratings and the choice of payment method in mergers and acquisitions

Karampatsas, Nikolaos; Petmezas, Dimitris; Travlos, Nickolaos G.

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Authors

Nikolaos Karampatsas

Nickolaos G. Travlos



Abstract

This paper establishes that credit ratings affect the choice of payment method in mergers and acquisitions. We find that bidders holding a high rating level are more likely to use cash financing in a takeover. We attribute this finding to lower financial constraints and enhanced capability of highly rated firms to access public debt markets as implied by their higher credit quality. Our results are economically significant and robust to several firm- and deal-specific characteristics and are not sensitive to the method used to measure the likelihood of the payment choice or after controlling for potential endogeneity bias.

Citation

Karampatsas, N., Petmezas, D., & Travlos, N. G. (2014). Credit ratings and the choice of payment method in mergers and acquisitions. Journal of Corporate Finance, 25, 474-493. https://doi.org/10.1016/j.jcorpfin.2014.01.008

Journal Article Type Article
Acceptance Date Jan 24, 2014
Online Publication Date Feb 8, 2014
Publication Date 2014-04
Deposit Date Jul 29, 2020
Publicly Available Date Nov 5, 2020
Journal Journal of Corporate Finance
Print ISSN 0929-1199
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 25
Pages 474-493
DOI https://doi.org/10.1016/j.jcorpfin.2014.01.008
Public URL https://durham-repository.worktribe.com/output/1295726
Related Public URLs https://epubs.surrey.ac.uk/819982/

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