Do hostile takeover threats matter? Evidence from credit ratings

Pattanaporn Chatjuthamard, Viput Ongsakul, Pornsit Jiraporn

Research output: Contribution to journalArticlepeer-review

6 Scopus citations

Abstract

Exploiting a novel measure of takeover vulnerability mainly based on state legislations, we explore the effect of hostile takeover threats on credit ratings. Our results reveal that companies with more takeover exposure are assigned significantly better credit ratings. In particular, a rise in takeover vulnerability by one standard deviation results in an improvement in credit ratings by 7.89%. Our findings are consistent with the view that the disciplinary mechanism associated with the takeover market mitigates agency problems and ultimately raises firm value. Further analysis corroborates our conclusion, including propensity score matching, entropy balancing, and an instrumental-variable analysis. As our proxy for takeover susceptibility is plausibly exogenous, our results are more likely to show a causal effect.

Original languageEnglish (US)
Article numbere0260688
JournalPloS one
Volume17
Issue number1 January
DOIs
StatePublished - Jan 2022

All Science Journal Classification (ASJC) codes

  • General

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