The impact of a credit rating on the capital structure of non-financial firms: Evidence from Chinese enterprises.

This paper mainly studies whether Chinese credit rating can affect the capital structure of Chinese non-financial listed companies. It is mainly based on Kisgen’s (2006) research method to build the CR-CS model, which is to use the company's internal financial information to build a model to predict the change of credit rating in the next period. According to the research hypothesis, if it is expected that the company whose credit rating grade is going to be upgraded or downgraded will change the debt issued by the company, and the company that will not face the credit rating adjustment will not change its capital structure, then it shows that the change of credit rating will indeed affect the corporate governance and financing decisions. Some of the existing literature analyses the impact of changes in credit ratings based on different country contexts on the capital structure of firms. Most of the research conclusions confirm that credit rating indeed affects the structure of the capital of a company, but some studies show that it is not statistically significant. This paper will apply the same method to test the impact of credit ratings on companies in a special national system like China. The results also point out that the impact of a Chinese credit rating on Chinese listed companies is not significant