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Bond Market Access, Credit Quality, and Capital Structure: Canadian Evidence


  • Usha R. Mittoo
  • Zhou Zhang


We examine the impact of bond market access (measured by having a credit rating) on leverage for Canadian high credit quality (HQ) and low credit quality (LQ) firms, and find that the leverage impact is more pronounced for LQ firms. The results are similar for U.S. firms. Our results are confirmed when we control for the firm's credit quality, examine the change in leverage around rating initiation, and account for the issue size effect. A similar leverage impact for Canadian and U.S. LQ firms suggests that the Canada-U.S. bond market integration has mitigated the financial constraints for Canadian LQ firms. Copyright (c) 2010, The Eastern Finance Association.

Suggested Citation

  • Usha R. Mittoo & Zhou Zhang, 2010. "Bond Market Access, Credit Quality, and Capital Structure: Canadian Evidence," The Financial Review, Eastern Finance Association, vol. 45(3), pages 579-602, August.
  • Handle: RePEc:bla:finrev:v:45:y:2010:i:3:p:579-602

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    Cited by:

    1. Shoaib Ali & Attiya Yasmin Javid, 2015. "Relationship between Credit Rating, Capital Structure and Earning Management Behaviour: Evidence from Pakistani Listed Firms," PIDE-Working Papers 2015:121, Pakistan Institute of Development Economics.
    2. repec:eee:japwor:v:45:y:2018:i:c:p:9-18 is not listed on IDEAS
    3. Judge, Amrit & Korzhenitskaya, Anna, 2012. "Credit market conditions and the impact of access to the public debt market on corporate leverage," International Review of Financial Analysis, Elsevier, vol. 25(C), pages 28-63.
    4. Sungchan Kim & Soyoung Park, 2016. "Credit Rating Inflation during the 2000s: Lessons from the U.S. State Governments," International Journal of Economics and Financial Issues, Econjournals, vol. 6(1), pages 13-19.

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