Template-type: ReDIF-Paper 1.0
Author-Name: Mascia Bedendo
Author-Name: Linus Siming 
Title: Debt Structure and Credit Ratings  
Abstract: We investigate whether a ?rm’s debt structure can act as a mitigating factor to the negative e?ects of a corporate rating downgrade. Speci?cally, we study how a ?rm’s relative mix of bank and non-bank ?nancing a?ects its stock market valuation and leverage adjustment following a downgrade. We document that, in the high-yield segment, companies with a larger proportion of bank debt su?er less from the distorting e?ects of rating downgrades, as they: (i) experience less negative abnormal stock returns around the event; (ii) reduce their market leverage less than peers that rely more on other sources of debt. Our ?ndings con?rm the bene?ts of bank ?nancing for risky ?rms and provide a number of new insights into how debt structure a?ects ?rm value and capital structure decisions over and above the information directly embedded in credit ratings.
Classification-JEL: G14, G24, G32
Keywords: Credit rating agencies, Market reaction, Debt structure
Length: 43 pages 
Number: 1622
Creation-Date: 2016
File-URL: https://repec.unibocconi.it/baffic/baf/papers/cbafwp1622.pdf
File-Format: application/pdf
File-Size: 386
Handle: RePEc:baf:cbafwp:cbafwp1622