The impact of anticipated credit rating changes on corporate payout policy

Lin, Zhengxun. (2009). The impact of anticipated credit rating changes on corporate payout policy Honours Thesis, School of Business, The University of Queensland.

       
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Author Lin, Zhengxun.
Thesis Title The impact of anticipated credit rating changes on corporate payout policy
School, Centre or Institute School of Business
Institution The University of Queensland
Publication date 2009
Thesis type Honours Thesis
Total pages 106
Language eng
Subjects 14 Economics
Formatted abstract The recent financial crisis has seen firms actively managed their corporate payout to preserve financial flexibility in response to an impending change in credit rating. For instance, General Electric Co's slashed its dividend by 68% after a rating downgrade from AAA to AA and Principal Financial Group Inc cutting dividend and suspending share repurchase program to maintain an AA rating. Hence, it will be timely to examine on how organisations manage their corporate payout policy when they are faced with an anticipated change in credit rating.

Motivated by the recent credit crisis, this thesis has the primary objective of determining whether an anticipated credit rating change will have an effect on organisations' corporate payout policy. Specifically, the results indicate that the presence of an impending credit rating downgrade has the ability to decrease the dividend payout by a significant 2.5158% but lack explanatory power to explain any change in share repurchase payout. Alternatively, the presence of an impending credit rating upgrade has no ability in explaining both the change in dividend payout and share repurchase payout. Furthermore, these evidences still hold for different subsamples categorised by different credit rating quality.


 
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Created: Sat, 06 Nov 2010, 11:18:57 EST by Ning Jing on behalf of The University of Queensland Library