Effects of credit rating changes on capital structure of Latin American firms
This study investigates whether non-financial Latin American firms adjust their capital structure in order to maintain certain rating levels. The credit rating-capital structure (CR-CS) hypothesis suggests that firms assume less debt after rating downgrades, aiming to retrieve necessary conditions t...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Universidade de São Paulo (USP)
2019-05-01
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| Series: | Revista de Contabilidade e Organizações |
| Subjects: | |
| Online Access: | https://www.revistas.usp.br/rco/article/view/154005 |
| _version_ | 1811284165509775360 |
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| author | Thiago Botta Paschoal Matheus da Costa Gomes Mauricio Ribeiro do Valle |
| author_facet | Thiago Botta Paschoal Matheus da Costa Gomes Mauricio Ribeiro do Valle |
| author_sort | Thiago Botta Paschoal |
| collection | DOAJ |
| description | This study investigates whether non-financial Latin American firms adjust their capital structure in order to maintain certain rating levels. The credit rating-capital structure (CR-CS) hypothesis suggests that firms assume less debt after rating downgrades, aiming to retrieve necessary conditions to restore a better rating. Through panel data analysis for the 2000-2014 period and by using the generalized method of moments (GMM), we show that a rating downgrade does not accelerate the speed of adjustment to the target, indicating that firms do not target minimum rating levels, as predicted by the CR-CS hypothesis. Although, rating changes are related to firms’ capital structure, we conclude that Latin American firms do not adjust their capital structure to maintain certain rating levels. |
| first_indexed | 2024-04-13T02:24:38Z |
| format | Article |
| id | doaj.art-5bd9a0a4567c4abd96b2e5980295a24b |
| institution | Directory Open Access Journal |
| issn | 1982-6486 |
| language | English |
| last_indexed | 2024-04-13T02:24:38Z |
| publishDate | 2019-05-01 |
| publisher | Universidade de São Paulo (USP) |
| record_format | Article |
| series | Revista de Contabilidade e Organizações |
| spelling | doaj.art-5bd9a0a4567c4abd96b2e5980295a24b2022-12-22T03:06:49ZengUniversidade de São Paulo (USP)Revista de Contabilidade e Organizações1982-64862019-05-011310.11606/issn.1982-6486.rco.2019.154005Effects of credit rating changes on capital structure of Latin American firmsThiago Botta PaschoalMatheus da Costa GomesMauricio Ribeiro do ValleThis study investigates whether non-financial Latin American firms adjust their capital structure in order to maintain certain rating levels. The credit rating-capital structure (CR-CS) hypothesis suggests that firms assume less debt after rating downgrades, aiming to retrieve necessary conditions to restore a better rating. Through panel data analysis for the 2000-2014 period and by using the generalized method of moments (GMM), we show that a rating downgrade does not accelerate the speed of adjustment to the target, indicating that firms do not target minimum rating levels, as predicted by the CR-CS hypothesis. Although, rating changes are related to firms’ capital structure, we conclude that Latin American firms do not adjust their capital structure to maintain certain rating levels.https://www.revistas.usp.br/rco/article/view/154005Capital structureCredit ratingPartial adjustmentTarget leverageLatin American firms |
| spellingShingle | Thiago Botta Paschoal Matheus da Costa Gomes Mauricio Ribeiro do Valle Effects of credit rating changes on capital structure of Latin American firms Revista de Contabilidade e Organizações Capital structure Credit rating Partial adjustment Target leverage Latin American firms |
| title | Effects of credit rating changes on capital structure of Latin American firms |
| title_full | Effects of credit rating changes on capital structure of Latin American firms |
| title_fullStr | Effects of credit rating changes on capital structure of Latin American firms |
| title_full_unstemmed | Effects of credit rating changes on capital structure of Latin American firms |
| title_short | Effects of credit rating changes on capital structure of Latin American firms |
| title_sort | effects of credit rating changes on capital structure of latin american firms |
| topic | Capital structure Credit rating Partial adjustment Target leverage Latin American firms |
| url | https://www.revistas.usp.br/rco/article/view/154005 |
| work_keys_str_mv | AT thiagobottapaschoal effectsofcreditratingchangesoncapitalstructureoflatinamericanfirms AT matheusdacostagomes effectsofcreditratingchangesoncapitalstructureoflatinamericanfirms AT mauricioribeirodovalle effectsofcreditratingchangesoncapitalstructureoflatinamericanfirms |