Credit ratings and the choice of payment method in mergers and acquisitions

Nikolaos Karampatsas, Dimitris Petmezas, Nickolaos Travlos

Research output: Contribution to journalArticlepeer-review

68 Citations (Scopus)
14 Downloads (Pure)


This paper establishes that credit ratings affect the choice of payment method in mergers and acquisitions. We find that bidders holding a high rating level are more likely to use cash financing in a takeover. We attribute this finding to lower financial constraints and enhanced capability of highly rated firms to access public debt markets as implied by their higher credit quality. Our results are economically significant and robust to several firm- and deal-specific characteristics and are not sensitive to the method used to measure the likelihood of the payment choice or after controlling for potential endogeneity bias.
Original languageEnglish
Pages (from-to)474-493
Number of pages20
JournalJournal of Corporate Finance
Early online date8 Feb 2014
Publication statusPublished - 1 Apr 2014
Externally publishedYes

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This document is the author’s post-print version, incorporating any revisions agreed during the peer-review process. Some differences between the published version and this version may remain and you are advised to consult the published version if you wish to cite from it.


  • Credit ratings
  • Method of payment
  • Mergers and acquisitions


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