Credit Ratings and Corporate Cash Holdings: Evidence from Korea's Corporate Reform after the 1997 Asian Financial Crisis

Cited 1 time in webofscience Cited 0 time in scopus
  • Hit : 214
  • Download : 0
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, due to the costs and benefits associated with different rating levels, credit ratings are a major consideration for corporate cash management. 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. Furthermore, this effect is driven by chaebol business groups that increasingly rely 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. (C) 2017 Elsevier B.V. All rights reserved.
Publisher
ELSEVIER SCIENCE BV
Issue Date
2018-03
Language
English
Article Type
Article
Keywords

CAPITAL STRUCTURE; BUSINESS GROUPS; FIRMS HOLD; GOVERNANCE; DEMAND; DETERMINANTS; TRANSACTIONS; PERFORMANCE; DIVIDENDS; DECISIONS

Citation

JAPAN AND THE WORLD ECONOMY, v.45, no.C, pp.9 - 18

ISSN
0922-1425
DOI
10.1016/j.japwor.2017.11.003
URI
http://hdl.handle.net/10203/241536
Appears in Collection
MT-Journal Papers(저널논문)
Files in This Item
There are no files associated with this item.
This item is cited by other documents in WoS
⊙ Detail Information in WoSⓡ Click to see webofscience_button
⊙ Cited 1 items in WoS Click to see citing articles in records_button

qr_code

  • mendeley

    citeulike


rss_1.0 rss_2.0 atom_1.0