The information content of issuer rating changes: Evidence for the G7 stock markets

Hu, Haoshen; Kaspereit, Thomas; Prokop, Jörg

doi:10.1016/j.irfa.2016.06.012

Cited by 18 publications

(7 citation statements)

References 59 publications

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“…The relatively stronger findings observed in the case of rating upgrades seem to contradict with several previous studies that report significant stock market reactions observed primarily in the case of rating downgrades (e.g. Hu et al, 2016;Li et al, 2006;Brooks et al 2004). 7 However, there is also evidence in the literature showing that the stock market reaction to rating upgrades as well as downgrades is significant, particularly since the introduction of Regulation Fair Disclosure (Jorion et al, 2005).…”

Section: Asymmetric Effect Of Upgrades and Downgradescontrasting

confidence: 99%

Credit ratings and predictability of stock return dynamics of the BRICS and the PIIGS: Evidence from a nonparametric causality-in-quantiles approach

Balcılar

Bathia

Demirer

et al. 2021

The Quarterly Review of Economics and Finance

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Section: Asymmetric Effect Of Upgrades and Downgradescontrasting

confidence: 99%

Credit ratings and predictability of stock return dynamics of the BRICS and the PIIGS: Evidence from a nonparametric causality-in-quantiles approach

Balcılar

Bathia

Demirer

et al. 2021

The Quarterly Review of Economics and Finance

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“…2. Griffin and Sanviscente (1982); Holthausen and Leftwich (1986); Ederington and Goh (1998); Goh and Ederington (1999); Norden and Weber (2004); Li, Shin and Moore (2006); Kim and Nabar JRF 18,4 (2007); and Hu, Kaspereit and Prokop (2016) document significant stock price responses to rating downgrades but not to upgrades.…”

Section: Discussionmentioning

confidence: 99%

The impact of sovereign rating events on bank stock returns

2017

JRF

Self Cite

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Purpose This paper aims to investigate the impact of sovereign rating signals on domestic banks’ stock returns in a European context. Design/methodology/approach The author uses an event study technique to measure short-term bank stock abnormal returns that result from domestic positive or negative sovereign rating events. Then, test results from the univariate event studies are further scrutinised with the bank- and sovereign-related factors related to cross-sectional variations in abnormal bank returns. Findings The univariate results show that positive sovereign rating events do not lead to significant bank stock price reactions, while negative events are associated with negative share price effects on domestic banks. The multivariate regression results for the subsample of negative rating events show that the degrees of contagion effects depend on which credit rating agency issues the signal, on whether the events are preceded by other negative sovereign rating signals, and in some cases on the sovereign’s initial rating level and on the bank’s liquidity ratio, profitability level and size. Originality/value The study improves the test procedures used by Caselli et al. (2016) and sheds light on the bank valuation effect induced by massive negative sovereign rating signals during the crisis period. The results highlight the share price effect of sovereign events and address political implications of introducing risk weights for sovereign debts.

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“…Meanwhile, Choy et al (2006) documented that downgrades have relevant information aligned with US studies, and Elayan et al (2003) documented that in smaller markets there were also price impacts for rating upgrades. More broadly, Hu et al (2016) highlighted that significant effects have been identified from downgrades in the USA, UK and Italy but not for other G7 countries.…”

Section: Literature Review 21 Rating Agencies and Credit Ratingmentioning

confidence: 99%

The impact of rating classifications on stock prices of Brazilian companies

Pagin

Gomes

Antônio

et al. 2021

JEFAS

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Purpose This paper aims to identify if there is an impact of the rating announcements issued by the agencies on the returns of the stocks of Brazilian companies listed on Brasil Bolsa Balcão, from August 2002 to August 2018, identifying which types of announcement (upgrade, downgrade or the same initial classification) cause variations in prices around the date of disclosure of the rating. Design/methodology/approach The event study methodology was applied to verify the market reaction around the announcement dates in a 21-day event window (−10, +10). The market model was used to calculate the abnormal returns (ARs), and subsequently, the accumulated ARs. Findings The hypotheses tests allowed to verify that the accumulated ARs are different, before and after the three types of rating announcements (upgrades, downgrades and the same classification); in upgrades, the mean of accumulated ARs increases in the days before the event, while in downgrades, this increase occurs after the event. This paper concluded that the rating announcements have an impact on the return of stock of the Brazilian market and that the market reaction occurs most of the time before the event happens, which indicates that the market can anticipate the information contained in the changes in credit ratings. Practical implications The results have considerable implications for portfolio managers, institutional investors and traders. It facilitates investment decision-making in the face of rating classification announcements. Market participants can pay more attention to their investment strategies and asset allocation during periods of risk rating announcements. Additionally, traders can understand the form of investment strategy for superior earnings. Originality/value The importance of the study is related to the fact that the results may explain the causes of specific movements in the Brazilian financial market related to a source of information that may or may not be able to influence the decisions of the financial agents that operate in this market. The justification is centred on the idea that, for investors who somehow react to the announcements, it is relevant to understand the impact of rating classifications on companies, as access to such information allows for more conscious decision-making.

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The information content of issuer rating changes: Evidence for the G7 stock markets

Cited by 18 publications

References 59 publications

Credit ratings and predictability of stock return dynamics of the BRICS and the PIIGS: Evidence from a nonparametric causality-in-quantiles approach

Credit ratings and predictability of stock return dynamics of the BRICS and the PIIGS: Evidence from a nonparametric causality-in-quantiles approach

The impact of sovereign rating events on bank stock returns

The impact of rating classifications on stock prices of Brazilian companies

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