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논문검색

Do investment grade cut-offs affect managers’ investment decisions?

초록

영어

This study finds that as rating levels for corporate bonds improve, firms tend to increase capital investment, but this positive relationship is reduced or changed negatively with at or near BBB rating in Korea. Especially these results support that a threat of downgrading to speculative-grade discipline the managers with overinvestment preference or overconfidence. When the managers did not have overinvestment preference or overconfidence, the effect of investment-grade cut-offs disappear or decreases. This study then has implications for the literature on the credit rating and investment decisions and the studies on behavioral corporate finance.

목차

Abstract
2. Literature review and hypothesis
2.1 Credit ratings and investment decisions
2.2 Downgraded credit ratings
2.3 Hypothesis
3. Empirical design
3.1 Sample selection
3.2 Variables
3.3 Methodology
4. Empirical results
4.1 Summary statistics
4.2 Do the investment-grade cut-offs affect firms’ capital investment?
4.3 Panel regression using other rating intervals
4.4. Real threat of a downgrade
4.5 Managers’ overinvestment preference or overconfidence and investment grade cut-offs
4.6 Do investment grade cut-offs provides managers the precautionary motive?
5. Robustness checks
5.1 Endogeneity Isuue
5.2 Results for the rank biserial correlation for each credit rating dummy
5.3 Results for the non- and semi-parametric tests
5. Conclusion
References

저자정보

  • Seonhyeon Kim Business School, Korea University, Republic of Korea
  • Changki Kim Business School, Korea University, Republic of Korea

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