(The) effect of a firm's market value on its credit rating soliciting and capital structure

Abstract

This study investigated the effect of a firm's market value on its credit rating soliciting and financing from 2007 to 2016 on firms on the S&P 500 list. Financing is generally divided into equity and debt. The analyses revealed that firms with less recognized value in the market were more likely to solicit credit ratings to raise capital through debt. Therefore, it can be confirmed that a firm's market value influences its capital structure. Additionally, the effect became more enhanced when raising equity was difficult during the subprime crisis. This study aims to empirically demonstrate the motivations of managers in solicting credit ratings through the market value of firms and to enhance understanding of rated and unrated firms.