We examine the extent to which credit ratings affect firms’ cash holdings by investigating the circumstances in Korea after the 1997 Asian financial crisis. We find that credit ratings are a major consideration for corporate cash management because of the costs and benefits associated with different rating levels. Specifically, firms that become relatively sensitive to rating changes increase their cash holdings, either to improve the chances of an upgrade or to avoid a downgrade. Further, this effect is driven by chaebol business groups, which rely increasingly on external financing that depends on credit ratings following the attenuation of their internal capital markets. Finally, we show that the impact of credit ratings on firms’ cash holdings is more noticeable when firms are more prominent in the market.
JEL: G01, G24, G32
학회소식
[2016년 제 3차] Credit Ratings and Corporate Cash Holdings:Evidence
작성자 : 관리자
조회수 : 1054
게시일 :
2016-08-24
