Financial Constraints and
Corporate Credit Ratings
Essays in Corporate Finance and Risk Management
Dissertation
Submitted in Fulfillment of the Requirements for the Degree of Doctor of Economics
and Social Sciences (Dr. rer. pol.) to the Faculty of Business Administration of the
University of Hamburg
by
Diplom-Wirtschaftsingenieur Sascha Heller
born in Hof/Saale
Hamburg 2015
Chairman of the Examination Committee: Prof. Dr. Malte Fliedner
Reviewer: Prof. Dr. Wolfgang Drobetz
Co-Reviewer: Prof. Dr. Peter Stahlecker
Thesis Defense Date: 15 June 2015
To my Partner and my Parents.
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Content
List of tables................................................................................................................ vii
List of graphs ............................................................................................................... ix
List of appendices ........................................................................................................ ix
Acknowledgements ..................................................................................................... xi
Synopsis ......................................................................................................................... 1
Literature ................................................................................................................... 9
Chapter 1: A Critical Review on Firm-specific Measures of Financial
Constraints ................................................................................................................. 12
Abstract ................................................................................................................... 12
I Introduction ...................................................................................................... 13
II Measures of financial constraints .................................................................. 14
A. Univariate measures ......................................................................................... 15
B. Index-based measures ...................................................................................... 21
C. Sensitivity measures/Euler equation ................................................................ 24
III Credit ratings .................................................................................................. 28
A. Credit ratings and capital structure .................................................................. 28
B. Credit ratings and financial constraints ............................................................ 29
C. Credit ratings as financial constraints measure ................................................ 31
IV Conclusions ..................................................................................................... 34
Literature ................................................................................................................. 36
Chapter 2: International Evidence on Financial Constraints, Investment, and the
Value of Cash ............................................................................................................. 44
Abstract ................................................................................................................... 44
I Introduction ...................................................................................................... 45
II Hypotheses and related literature ................................................................. 46
A. Testable hypotheses ......................................................................................... 46
B. Related literature .............................................................................................. 48
III Data and empirical methodology .................................................................. 51
A. Data description ............................................................................................... 51
B. Measures of financial constraints ..................................................................... 51
C. Measures of financial market development and corporate governance ........... 52
D. Empirical methodology .................................................................................... 53
IV Empirical results ............................................................................................ 56
V Conclusions ...................................................................................................... 77
Literature ................................................................................................................. 79
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Chapter 3: What Factors Drive Corporate Credit Ratings? Evidence from
German SMEs and Large Corporates ..................................................................... 83
Abstract ................................................................................................................... 83
I Introduction ...................................................................................................... 84
II Theoretical background and related literature ........................................... 85
A. Theoretical background .................................................................................... 85
B. Related literature .............................................................................................. 87
III Data and empirical methodology .................................................................. 90
A. Financial ratios and qualitative factors ............................................................ 90
B. Empirical methodology ................................................................................... 94
C. Data description ............................................................................................... 97
IV Empirical results – financial ratios ............................................................... 98
A. Data description ............................................................................................... 98
B. OLR estimates ................................................................................................ 101
C. Predictive accuracy ........................................................................................ 104
D. Marginal effects ............................................................................................ 107
IV Empirical results – financial ratios and qualitative criteria .................... 113
A. Data description ............................................................................................. 113
B. OLR estimates ............................................................................................... 114
C. Predictive accuracy ........................................................................................ 120
D. Marginal effects ............................................................................................ 123
V Conclusions .................................................................................................... 131
Literature ............................................................................................................... 133
Chapter 4: The Impact of Credit Rating Changes on Capital Structure Decisions
– Evidence from Non-listed Firms in Germany .................................................... 138
Abstract ................................................................................................................. 138
I Introduction .................................................................................................... 139
II Hypotheses and related literature ............................................................... 142
A. Testable hypotheses ....................................................................................... 142
B. Related literature ............................................................................................ 144
III Data and empirical methodology ................................................................ 148
A. Data description ............................................................................................. 148
B. Empirical methodology .................................................................................. 149
IV Empirical results .......................................................................................... 154
A. Capital structure decisions ............................................................................. 154
B. Financing choices ........................................................................................... 159
C. Speed of adjustment ....................................................................................... 163
V Conclusions .................................................................................................... 170
Literature ............................................................................................................... 172
Conclusions and Remarks ....................................................................................... 175!
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List of tables
Chapter 2: International Evidence on Financial Constraints, Investment, and the
Value of Cash
Table 1 - Descriptive statistics across financial constraints criteria (U.S. and world) 57
Table 2 - Marginal value of cash holdings across financial constraints criteria (U.S.
and world) ...........
