Restraining Overconfident CEOs Through Credit Ratings

Khoo, Shee Yee, Verousis, Thanos, Vu, Huong and Klusak, Patrycja (2025) Restraining Overconfident CEOs Through Credit Ratings. European Financial Management, 31 (5). pp. 1771-1792. ISSN 1354-7798

Preview

PDF (Euro Fin Management - 2025 - Khoo - Restraining Overconfident CEOs Through Credit Ratings) - Published Version Available under License Creative Commons Attribution. Download (467kB) | Preview

Abstract

Overconfident CEOs significantly reduce their acquisition activity when facing a higher risk of a credit rating downgrade, possibly because credit ratings impact their ability to access external financing. Investment-grade firms managed by overconfident CEOs that are placed on a negative rating outlook reduce their acquisitiveness by approximately 16 percentage points. Our findings offer a novel perspective on the role of credit rating agencies as an external control mechanism, constraining overconfident managers from pursuing value-destroying acquisitions. Our findings survive a battery of robustness checks, including endogeneity, controlling for internal control mechanisms and market reaction tests.

Item Type:	Article
Uncontrolled Keywords:	behavioural theory of the firm,ceo overconfidence,credit ratings,mergers and acquisitions,accounting,general economics,econometrics and finance ,/dk/atira/pure/subjectarea/asjc/1400/1402
Faculty \ School:	Faculty of Social Sciences > Norwich Business School
Related URLs:	https://www.scopus.com/pages/publication...
Depositing User:	LivePure Connector
Date Deposited:	19 May 2026 13:06
Last Modified:	19 May 2026 13:06
URI:	https://ueaeprints.uea.ac.uk/id/eprint/103098
DOI:	10.1111/eufm.12557

Downloads

Actions (login required)

View Item