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

Samaniego‐Medina, Reyes; Pietro, Filippo Di

doi:10.1111/jifm.12106

Cited by 8 publications

(6 citation statements)

References 44 publications

(118 reference statements)

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“…There is also an increase in debt costs related to the rise in interest rates and inflation, in addition to an increase in the premium charged by international creditors to compensate for the risk inherent in the countries. In this context, several studies have presented empirical evidence on the effects of sovereign ratings on both the performance and debt of firms (Cai et al, 2019;Chen et al, 2013;Jesuka & Peixoto, 2022;Joo & Parhizgari, 2021;Medina & Di Pietro, 2019). Chen et al (2013) investigated the effects of sovereign rating changes in 48 countries on corporate investment over the period 1983-2009 and found that there were significant increases in private investment growth after sovereign rating upgrades, as well as significant and temporary declines in investment after sovereign rating downgrades.…”

Section: Theoretical Frameworkmentioning

confidence: 99%

“…Chen et al (2013) investigated the effects of sovereign rating changes in 48 countries on corporate investment over the period 1983-2009 and found that there were significant increases in private investment growth after sovereign rating upgrades, as well as significant and temporary declines in investment after sovereign rating downgrades. Medina and Di Pietro (2019) investigated the effects of rating changes on the speed of leverage adjustment of listed European firms over the period 2004-2014 and reported that a rating downgrade decision adjusts capital structure more slowly than an upgrade.…”

Section: Theoretical Frameworkmentioning

confidence: 99%

“…7. Sovereign rating (SOVRAT): when there are changes in the sovereign rating of a country, the financial market reacts according to the type of announcement and generates contagion among economic sectors, affecting the cost of external funding of companies and possibly causing investor flight (Jesuka & Peixoto, 2022;Medina and Di Pietro (2019). In this study, following Boumparis, Milas, and Panagiotidis (2019), we transformed the ratings from Standard & Poor's, Fitch Rating, and Moody's Investors into a numerical scale so that the higher the rating, the better the country's sovereign rating.…”

Section: Audit Committee Independence (Ind_audit)mentioning

confidence: 99%

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The Effects of Sovereign Rating and Corporate Governance on The Capital Structure of Latin American Companies

Jesuka

Peixoto

2023

BAR, Braz. Adm. Rev.

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1 BAR -Brazilian Administration Review encourages data sharing but, in compliance with ethical principles, it does not demand the disclosure of any means of identifying research subjects.Plagiarism Check: BAR maintains the practice of submitting all documents received to the plagiarism check, using specific tools, e.g.: iThenticate.Peer review: is responsible for acknowledging an article's potential contribution to the frontiers of scholarly knowledge on business or public administration. The authors are the ultimate responsible for the consistency of the theoretical references, the accurate report of empirical data, the personal perspectives, and the use of copyrighted material. This content was evaluated using the double-blind peer review process. The disclosure of the reviewers' information on the first page is made only after concluding the evaluation process, and with the voluntary consent of the respective reviewers.

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Section: Theoretical Frameworkmentioning

confidence: 99%

Section: Theoretical Frameworkmentioning

confidence: 99%

Section: Audit Committee Independence (Ind_audit)mentioning

confidence: 99%

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The Effects of Sovereign Rating and Corporate Governance on The Capital Structure of Latin American Companies

Jesuka

Peixoto

2023

BAR, Braz. Adm. Rev.

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“…Moreover, other studies on the effects of credit ratings on non-financial firms' capital structure (Kisgen, 2009;Samaniego-Medina and di Pietro, 2019;Wojewodzki et al, 2018) highlight the importance of borderline (between investment and non-investment grade) credit ratings on capital structure. This is due to regulatory restrictions imposed on institutional investors in the U.S. and other countries (Kisgen, 2019), thereby negatively affecting non-investment grade firms' costs of external finance and pool of investors.…”

Section: Hypotheses Developmentmentioning

confidence: 99%

Credit rating, banks' capital structure and speed of adjustment: A cross-country analysis

Wojewodzki

Boateng

Brahma

2020

Journal of International Financial Markets, Institutions and Mo

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Recent studies examining the effects of a credit rating on firms' capital structure and adjustment of capital structure to target have focused predominantly on non-financial firms, with virtually no attention given to financial institutions. Using an international sample of 391 rated banks from 76 countries, this study examines the effects of credit ratings on the capital structure of banks. We find that, on average, banks near a credit rating upgrade have a higher capital to assets ratio compared to banks not near a rating upgrade. Most systematically important "too-big-to-fail" banks near a credit rating upgrade tend to have lower capital relative to assets than the rest of the banks in our sample. Furthermore, banks downgraded from an investment-grade rating to a speculative-grade rating, on average, hold 1 (3) percentage points less capital relative to assets in the short (long) run. Contrary to studies based on non-financial firms, our results show that credit ratings have relatively little economic effect on the speed at which banks' capital is adjusted. Our results suggest that while rating agencies exert influences on banks' capital structure, they are fewer in number and tend to be weaker, compared to those documented in non-financial firms.

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“…The first contribution is aimed at verifying how the attribution of the external rating can influence the choices on the financial structure of the companies. The article by Samaniego‐Medina and Di Pietro () (“Rating and capital structure. How do the signs affect the speed of adjustment?”) explores the influence that the attribution of a rating of a particular class has on the degree of leverage.…”

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confidence: 99%

Controlling risks to ensure financial stability and reducing volatility

Gabbi

Levich

2019

Financ Manag Account

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The 11th International Risk Management Conference was held at the University of Paris‐Dauphine and the EM LYON Business School (Paris Campus) in June 2018. The conference theme “1968–2018: From Z‐Score to Contemporary Risk Management, 50 Years of Risk Measurement and Management” was selected as a means to showcase the many ways that financial risk measurement has evolved and impacted financial risk management in banks and corporations as well as the tools used by asset managers and market regulators. The four papers included in this special issue of the Journal of International Financial Management and Accounting focus on a wide range of issues: How small differences in credit ratings effect the speed of adjustment in corporate leverage, the impact of using soft variables to assess default probabilities in European corporations, a new approach to measuring a company's intrinsic risk, and the effectiveness of short sale circuit breaker rules to limit stock price volatility. Our Foreword highlights the main findings of these papers and offers our assessment of the lessons they provide for financial managers and policymakers.

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

Cited by 8 publications

References 44 publications

The Effects of Sovereign Rating and Corporate Governance on The Capital Structure of Latin American Companies

The Effects of Sovereign Rating and Corporate Governance on The Capital Structure of Latin American Companies

Credit rating, banks' capital structure and speed of adjustment: A cross-country analysis

Controlling risks to ensure financial stability and reducing volatility

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