This study examines the impact of credit ratings on the efficiency of firms'investments. Using a large sample of US firms, we find a positive relationshipbetween the existence of credit ratings and investment efficiency. The cross-sectional analyses show the positive relationship is more pronounced for firmswith greater information asymmetry and weaker corporate governance. Ourresults are robust to different methods to address potential endogeneity con-cerns, alternative measures of key variables, and the inclusion of additionalcontrol variables. Overall, the findings support the notion that credit ratingagencies enhance information transparency and external monitoring, therebyallowing rated firms to promote investment efficiency. The findings contributeto our understanding of the significant role played by credit rating agencies inshaping firms' investment behaviour and efficiency.