Credit Ratings and Corporate Payouts: Share Repurchase Behavior in the Turkish Market

This study examines whether credit ratings constrain corporate payout decisions, focusing on share repurchase behavior in the Turkish stock market during the period 2016-2024. Using firm-level data and a series of probit, logit and OLS models, we find robust evidence which shows that firms with higher credit ratings are significantly less likely to engage in share repurchases and, when they do, they repurchase smaller amounts. These results support the rating constraint hypothesis, suggesting that concerns over preserving credit quality limit firms’ willingness to return capital to shareholders. Profitability and firm size also emerge as important drivers, while leverage and cash holdings appear less influential. Importantly, we show that the constraining effect of credit ratings is more pronounced in the post-COVID period, when economic uncertainty likely heightened managerial conservatism. Our findings highlight the role of external credit assessments in shaping internal financial decisions, particularly in emerging markets with growing credit rating coverage. The results carry practical implications for shareholders, managers, investors, and policymakers concerned with the interplay between credit risk and corporate payout policy.