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

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  • Goergen, Marc
  • Gounopoulos, Dimitrios
  • Koutroumpis, Panagiotis

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.

Suggested Citation

  • Goergen, Marc & Gounopoulos, Dimitrios & Koutroumpis, Panagiotis, 2021. "Do multiple credit ratings reduce money left on the table? Evidence from U.S. IPOs," Journal of Corporate Finance, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:corfin:v:67:y:2021:i:c:s0929119921000195
    DOI: 10.1016/j.jcorpfin.2021.101898
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    3. Kladakis, George & Chen, Lei & Bellos, Sotirios K., 2022. "Multiple credit ratings and liquidity creation," Finance Research Letters, Elsevier, vol. 46(PA).
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    More about this item

    Keywords

    Initial public offerings (IPOs); Credit ratings; IPO underpricing; Survivorship;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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