Do Credit Ratings Really Affect Capital Structure?


Corresponding author: Department of Finance and Insurance, Miller College of Business, Ball State University, Muncie, IN 47306; Phone: 765-285-2198; Fax: 765-285-4314; E-mail:


This paper revisits recent investigations into the role credit ratings play in the marginal financing behavior of firms. Although it has long been documented that credit ratings may be an important determinant of firm capital structure policy, academics have only recently subjected this motivation to empirical scrutiny. We add to the brief existing literature by investigating the sensitivity of marginal financing behavior of firms to a number of attributes deemed to capture firms’ affinity to emphasize credit ratings in their financing behavior. Our results suggest that credit ratings are not a first-order concern in capital structure decisions.