The impact of credit ratings on capital structure (The case of listed companies on hose)

Abstract

This research aims to examine the impact of credit ratings influencing the capital structure of listed enterprises on Hochiminh Stock Exchange. The research data were collected from 239 listed enterprises over the period of 4 years in the period between 2009 and 2012 to use for Panel data method. The research would conduct test assumptions to define the optimal regression model among Pooled OLS, Fixed Effects Models and Random Effect Model. The thesis has two empirical models : - The first empirical model investigates whether the firm which has a higher credit rating, have lower financial leverage than those with lower credit ratings. The study finds that credit ratings are an important determinant of the capital structures of firms and that there is a strong relationship between credit ratings and capital structures. - The second empirical model examines the influence of the change of credit ratings between each year on the short term debt to equity of listed firms on Hochiminh stock exchange. Consistent with the predictions, the results indicate that firms‘ change of credit rating significantly influenced on the following year‘s short term debt of the firm. Keywords: credit ratings, capital structure