Abstract
This paper examines how firm credit ratings affect the use of outstanding private debt and unused lines of credit. Firms not having credit ratings have more outstanding private debt and unused lines of credit than firms having credit ratings. Firms of low credit ratings also use more private debt than firms of high credit ratings. Firms rated speculative grades increase unused credit lines more than firms rated investment grades when their credit ratings deteriorate. Moreover, firms with high credit ratings have more unused lines of credit relative to outstanding private debt than firms with low credit ratings. Firms also use more private debt when they are near credit rating upgrades or downgrades between investment grades and speculative grades.
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