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Are Credit Rating Disagreements Priced in the M&A Market?

SSRN Electronic Journal
2021
  • 0
    Citations
  • 619
    Usage
  • 0
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Usage
    619
    • Abstract Views
      582
    • Downloads
      37

Article Description

This paper examines the effect of credit rating disagreements on merger and acquisition (M&A) decisions. We show that acquirers with split ratings prefer to use stock to finance their acquisitions. More importantly, we find that acquirers with split ratings experience lower announcement returns. Further analysis shows that overpayment by acquirers with split ratings is concentrated in acquirers with entrenched managers. Our results are robust to alternative identification strategies. Overall, our evidence indicates that credit rating disagreements are heavily priced in the M&A market.

Bibliographic Details

Iftekhar Hasan; He Huang; Thomas Yin To

Elsevier BV

Bond ratings; Method of payment; Merger and acquisitions

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