2013
DOI: 10.2139/ssrn.2305821
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The Impact of Sovereign Rating News on European Banks

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Cited by 7 publications
(17 citation statements)
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“…Correspondingly, stock markets are most surprised by the new information. Similar findings with respect to the co-movement between sovereign ratings and bank stocks are found by Correa et al (2014) and Caselli et al (2016). By investigating the reaction of bank stocks in 37 countries to sovereign rating changes from 1995 to 2011, Correa et al (2014) find that bank's stock prices decrease significantly upon sovereign rating downgrades but are less sensitive to upgrades.…”
Section: Banks and Market Integrationsupporting
confidence: 71%
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“…Correspondingly, stock markets are most surprised by the new information. Similar findings with respect to the co-movement between sovereign ratings and bank stocks are found by Correa et al (2014) and Caselli et al (2016). By investigating the reaction of bank stocks in 37 countries to sovereign rating changes from 1995 to 2011, Correa et al (2014) find that bank's stock prices decrease significantly upon sovereign rating downgrades but are less sensitive to upgrades.…”
Section: Banks and Market Integrationsupporting
confidence: 71%
“…Therefore, banks are extremely sensitive to sovereign credit risks. Prior studies find that the stock prices of domestic banks decrease significantly upon negative sovereign rating announcements but have no significant reaction to positive ones, particularly in developed markets (Alsakka et al, 2014;Correa et al, 2014;Caselli et al, 2016). In regions with more serious information asymmetry, even positive sovereign rating announcements can have a significant positive impact on bank stocks (Williams et al, 2013(Williams et al, , 2015.…”
Section: Introductionmentioning
confidence: 99%
“…Alsakka et al (2014) reported similar results in Europe, especially during the crisis and for the peripheral countries. Moreover, Caselli et al (2014) found that sovereign rating downgrades have a negative effect on bank share prices in the eurozone, while rating upgrades have no influence. However, since sovereign risk impacts negatively on banks' balance sheets and reduces their government guarantees, it is likely that the reduction in banks' rating observed in these studies is more a consequence of the other three channels mentioned previously.…”
Section: Contagion Between Bank and Sovereign Riskmentioning
confidence: 99%
“…On the one hand, the coefficient β2 measures the effects of sovereign risk (SR) on stock returns before the SSM. We expect this coefficient to have a negative and significant sign, since before the SSM an increase in sovereign risk would rapidly reduce the stock returns of the domestic banks (Caselli et al 2014). On the other hand, the coefficient β3 captures the differential effects of sovereign risk on stock returns after the SSM in relation to the period before it.…”
Section: Econometric Model and Datamentioning
confidence: 99%
“…What started as a sovereign debt crisis in Greece soon transmitted to Portugal, Ireland, Cyprus and, at least partially, to Spain and Italy. It soon became clear for Europe that, beneath the sovereign debt crisis surface, there also existed a severe banking crisis (Caselli et al ., ). The propagation of financial distress from one country to another, with stock markets, bond yields and credit default swaps (CDS) spreads being affected, makes the studying of the transmission of extreme returns more pertinent than ever…”
Section: Introductionmentioning
confidence: 97%