Khoo, Shee-YeeVerousis, ThanosVu, HuongKlusak, Patrycja2025-05-122025-05-1220251354-779810.1111/eufm.12557https://repository.vlerick.com/handle/20.500.12127/7672Overconfident CEOs significantly reduce their acquisition activity when facing a higher risk of a credit rating downgrade, possibly because credit ratings impact their ability to access external financing. Investment-grade firms managed by overconfident CEOs that are placed on a negative rating outlook reduce their acquisitiveness by approximately 16 percentage points. Our findings offer a novel perspective on the role of credit rating agencies as an external control mechanism, constraining overconfident managers from pursuing value-destroying acquisitions. Our findings survive a battery of robustness checks, including endogeneity, controlling for internal control mechanisms and market reaction tests.enBehavioural Theory of the FirmCEO OverconfidenceCredit RatingsMergers and AcquisitionsEuropean Financial Management1468-036X311477