Essays in corporate finance
This dissertation studies the impact of credit rating on firms’ financing behavior and investigates insider trading activities. The first essay documents how firms’ concerns about credit rating change affect their choice between the use of debt and lease. Firms approaching a credit rating change ten...
Saved in:
| Main Author: | |
|---|---|
| Format: | text |
| Language: | English |
| Published: |
Institutional Knowledge at Singapore Management University
2018
|
| Subjects: | |
| Online Access: | https://ink.library.smu.edu.sg/etd_coll/169 https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1169&context=etd_coll |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| Institution: | Singapore Management University |
| Language: | English |
| Summary: | This dissertation studies the impact of credit rating on firms’ financing behavior and investigates insider trading activities.
The first essay documents how firms’ concerns about credit rating change affect their choice between the use of debt and lease. Firms approaching a credit rating change tend to use less debt relative to operating leases to finance their new projects. In this paper, I propose a new method of measuring the potential of a credit rating change. Using the new measures, I find that not only the concerns about being downgraded but also the at- tempts to get upgraded have significant impacts. The result is surprising because rating agencies are fully aware of firms’ use of off-balance-sheet finance and make correspond- ing adjustments when they assess firms’ creditworthiness. There are two possible reasons for the result. First, the operating lease obligations are usually underestimated. Second, auditors tolerate more misstatement for disclosed off-balance-sheet items than they do for recognized balance sheet items. |
|---|