Credit ratings and acquisitions

There is a curvilinear relation between credit ratings and acquisitions. Non-investment grade firms make more acquisitions as their improve, consistent with the relaxation of financial constraints. However, this pattern reverses for investment firms, supporting view that such want to preserve rating are concerned about acquisition-related downgrades. Abnormal returns first decrease then increase improve. In support these findings, have negative impact on future only highly-rated firms. These results indicate level firm's has significant acquisition process.