Cross-country variations in capital structure adjustment—The role of credit ratings

Huang, Yu-Li; Shen, Chung‐Hua

doi:10.1016/j.iref.2015.04.011

Cited by 25 publications

(40 citation statements)

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“…A change in firms' leverage with a minus sign could cause a change in their risk profile, which could cause agencies to adjust their ratings, given the increased cost that this would imply for the company. This concern about rating downgrades has also been expressed by Kisgen (2006), Maung and Chowdhury (2014), and Huang and Shen (2015). That said, the coefficient of the lagged dependent variable of the no-sign companies group is (0.871) and the coefficient of the plus-sign companies group is (0.912).…”

Section: Results Of the Base Regression Modelmentioning

confidence: 98%

“…This asymmetric effect of rating changes has also been analyzed for its effect on long‐run stock returns (Dichev & Piotroski, ). Specifically, with respect to capital structure, Huang and Shen () demonstrate this asymmetric effect: Firms adjust their capital structure when ratings are downgraded, but they do not significantly adjust the capital structure when ratings are upgraded. In similar research, Maung and Chowdhury () study the time it takes firms to adjust their capital structure when both a downgrade and an upgrade of credit ratings occur.…”

Section: Literature Reviewmentioning

confidence: 99%

“…However, only a small number of studies are developed in an international context. In this respect, Huang and Shen () find that the effect of a credit rating change is more pronounced in countries with good legal and institutional characteristics than in countries with poor legal and institutional characteristics, whereas Wojewodzki et al. () conclude that in countries with a more market‐oriented financial system, the impact of credit ratings on firms’ capital structure is more significant than it would be in a bank‐based country.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Recent studies (Huang & Shen, 2015;Wojewodzki, Winnie, & Shen, 2018) have suggested that the capital structure tends to vary across countries because of institutional structures. For that reason, we use a sample of listed European companies; specifically, our sample is composed of companies with a rating from the S&P Europe index.…”

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confidence: 99%

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Rating and capital structure: How do the signs affect the speed of adjustment?

Samaniego‐Medina

Pietro

2019

Financ Manag Account

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Standard and Poor's ratings can be modified by the addition of a plus (+) or minus (−) sign to show the relative standing within each major rating category. In this paper, we analyze the influence of these signs on the speed of leverage adjustment for listed European companies in the 2004–2014 period. Our results indicate that (a) when a qualification is accompanied by a minus sign, it adjusts more slowly than qualifications either with a plus sign or without a sign; (b) when a rating has a plus sign, the adjustment is slower than when it has no sign; and (c) when a qualification is BBB‐, the speed of its leverage adjustment is close to zero. These results suggest that companies with signs in their ratings decrease their speed of adjustment to the target leverage ratio. In addition, such companies are especially concerned about a credit rating downgrade when it implies a possible loss of the degree of investment (BBB‐).

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Section: Results Of the Base Regression Modelmentioning

confidence: 98%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

mentioning

confidence: 99%

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Rating and capital structure: How do the signs affect the speed of adjustment?

Samaniego‐Medina

Pietro

2019

Financ Manag Account

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“…The authors John R Graham and Campbell R Harvey decided that apart from the assessment of the financial liquidity of an economic entity, in the policy of shaping the structure of the company's capital (debt management), the risk assessment level in the form of a rating score was also important (Graham and Harvey, 2001;Graham et al, 2005). It was also stated that the capital structure of the companies adapted more quickly in more developed countries (Huang and Shen, 2015). In addition, it was shown that the rating score was an important factor influencing the manner of managing an enterprise (corporate governance) (Bereskin et al, 2015;Ashbaugh-Skaife et al, 2006).…”

Section: Rating Agenciesmentioning

confidence: 99%

Determinants of Interest Rates on Corporate Bonds of Mining Enterprises

Ranosz

2017

Archives of Mining Sciences

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This article is devoted to the determinants of interest rates on corporate bonds of mining enterprises. The study includes a comparison between the cost of foreign capital as resulting from the issue of debt instruments in different sectors of the economy in relation to the mining industry. The article also depicts the correlation between the rating scores published by the three largest rating agencies: S&P, Moody`s, and Fitch. The test was based on simple statistical methods. The analysis performed indicated that there is a dependency between the factors listed and the amount of interest rates on corporate bonds of global mining enterprises. Most significant factors include the rating level and the period for which the given series of bonds was issued. Additionally, it is not without significance whether the given bond has additional options. Pursuant to the obtained results, is should be recognized that in order to reduce the interest rate on bonds, mining enterprises should pay particular attention to the rating and attempt to include additional options in issued bonds. Such additional options may comprise, for example, an ability to exchange bonds to shares or raw materials.Keywords: mining corporate bonds, convertible bonds, callable and puttable bonds, bond's coupon Niniejszy artykuł został poświęcony determinantom oprocentowania obligacji korporacyjnych spółek górniczych. Do głównych czynników mających znaczący wpływ na wartość kuponu obligacji zaliczono: okres do wykupu obligacji, poziom ratingu oraz rodzaj obligacji. Każda z wymienionych zmiennych może wpływać na obniżenie oraz na podwyższenie wartości kuponu (oprocentowania) obligacji. Celem niniejszego opracowania jest zbadanie zależności pomiędzy kuponem a wymienionymi determinantami. Opracowanie zawiera również porównanie kosztu kapitału obcego wynikającego z emisji instrumentów dłużnych różnych sektorów gospodarki w stosunku do sektora górniczego. W artykule zbadano również korelację pomiędzy udzielanymi ratingami publikowanymi przez trzy największe agencje ratingowe, do których zaliczono: S&P, Moody`s oraz Fitch. Do przeprowadzenia badania wykorzystano proste metody statystyczne. Przeprowadzona analiza wykazała, iż istnieje zależność pomiędzy wymienionymi czynnikami a wartością oprocentowania obligacji emitowanych przez przedsiębiorstwa górnicze na świecie. 622Należy również stwierdzić, iż do najważniejszych należy zaliczyć poziom ratingu oraz okres na jaki została wyemitowana dana seria obligacji. Nie bez znaczenia jest również to czy dana obligacja posiada opcje dodatkowe. Na podstawie otrzymanych wyników należy stwierdzić, iż przedsiębiorstwa górnicze w celu obniżenia oprocentowania obligacji powinny zwracać szczególną uwagę na rating oraz starać się zwierać opcje dodatkowe w emitowanych przez siebie obligacjach. Taką opcją dodatkową może być na przykład możliwości zamiany obligacji na akcje czy też surowiec.Słowa kluczowe: górnicze obligacje korporacyjne, obligacje zamienne, obligacje callable i puttable, kupon obligacji

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