Abstract
Corporate credit ratings are important. Whether credit ratings are a valuable source of information on the creditworthiness of the issuer or merely an indicator to comply with investors’ regulatory requirements, CEOs and CFOs seem to devote significant effort into targeting and maintaining a minimum credit rating level. This is for good reasons since a credit rating downgrade typically translates into negative abnormal stock and bond returns and may force the firm to lower its leverage and reduce its investments. Professors Mascia Bedendo and Linus Liming of Audencia Business School looks at the impact on the firm and shareholders.