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Journal of Corporate Finance Vol. 67 2021

Do multiple credit ratings reduce money left on the table? Evidence from U.S. IPOs

Marc Goergen1,2; Dimitrios Gounopoulos3; Panagiotis Koutroumpis4

1 European Corporate Governance Institute · 2 IE University · 3 University of Bath · 4 Queen Mary University of London

open access

Abstract

Using credit ratings as an uncertainty-reducing mechanism, we provide evidence of the beneficial impact of multiple credit ratings on reducing IPO underpricing and filing price revision. We find that the acquisition of multiple ratings in the pre-IPO period mitigates uncertainty more than the acquisition of a single rating. Multi-rated firms also have higher probabilities of survival than those with a single rating, whereas credit rating levels matter only for IPOs with more than one rating. The IPOs that are awarded the first rating on the borderline between investment and non-investment grades are more likely to seek an additional rating.

DOI
10.1016/j.jcorpfin.2021.101898
Volume
67
Pages
101898
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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