Credit ratings are a key check on CEO overconfidence in corporate acquisitions
Overconfident chief executives and their risky behaviours can be partly restrained through credit ratings, new research finds.
Researchers led by Bangor University in Wales in the United Kingdom and other institutions including Heriot-Watt University in Edinburgh, Scotland, Vlerick Business School in Brussels, Belgium and The University of Aberdeen in Scotland found that the creditworthiness of a company can hugely influence how its chief executive behaves – especially during corporate mergers and acquisitions (M&A).
The research, which is published in the journal, European Financial Management, is based on data from 916 firms in the United States who were rated by American ...