Cross-sectional variation in the stock market reaction to bond rating changes

The information content of Australian credit ratings: A comparison between subscription and non-subscription-based credit rating agencies

“…The results of this paper are consistent with the findings in Hand et al (1992) and Goh and Ederington (1999).…”

“…Their results suggest that industry rivals experience significantly negative stock price effects at the time of the announcement of bond rating downgrades. Goh and Ederington (1999) reveal that significant abnormal pre-announcement equity returns remain during the announcements. The authors propose that if downgrades are expected and that they provide additional information to shareholders rather than bondholders, then investors should observe negative excess equity returns for both the pre-and post-announcement periods and the two periods will be positively correlated.…”

The economic function of credit rating agencies – What does the watchlist tell us?

“…Regarding cross-sectional aspects, stronger market effects are generally found for downgrades to and within the sub-investment-grade rating category (Goh and Ederington, 1999 feature enables watch-preceded credit ratings to convey information of a different quality:…”

Impact Indicators for Stock Markets Return

“…Most researchers have investigated the infl uence of changes in credit rating on the stock prices of publicly traded companies. Th e greatest part of them found evidence that rating downgrades generate a signifi cantly larger impact than rating upgrades (Dichev & Piotroski, 2001;Goh & Ederington, 1999). Choy, Gray and Ragunathan (2006) studied the impact of Moody and S&P rating revisions of 63 companies on the Australian stock market between 1989 and 2003.…”