We study initial and subsequent effects of credit ratings on acquisition activity. Our findings suggest that access to bond markets, i.e. overcoming bank lending constraints, in order to conduct large and high quality acquisitions is an important motive for becoming rated. This initial...

This paper investigates the Morellec and Zhdanov (2008) prediction that firms strategically underleverage to win takeover contests. In line with the MZ commitment hypothesis, we find that greater pre-bid leverage reduction is linked to greater acquisition activity. We document support for three...