This paper analyses the impact of credit rating changes from two aspects. Firstly,credit rating will impact company capital structure decisions. It is found thatcompanies generally issue more debt when forecasting a credit downgrade totake the advantage of the relatively low cost of capital, while a small number offirms keep corporate structure unchanged due to flexibility concerns. Secondly,there is an offset pattern in daily abnormal returns and volatility of stock returnsincreases after a credit rating change event. Specifically, downgrade has abigger impact on stock performance
