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  • 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.

  • ! v

    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

  • !vi

    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!

  • ! vii

    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) ...........

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