The Information Content of Municipal Bond Rating Changes: A Note

Ingram, Robert W.; Brooks, LeRoy D.; Copeland, Ronald M.

doi:10.1111/j.1540-6261.1983.tb02514.x

Cited by 88 publications

(29 citation statements)

References 6 publications

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“…They found no effect, whereas Katz (1974), Grier and Katz (1976), Ingram, Brooks, and Copeland (1983), Hand, Holtausen, and Leftwich (1992), Hite and Warga (1997) and Kliger and Sarig (2000) did.…”

Section: Related Literaturementioning

confidence: 95%

The New Rules of the Rating Game: Market Perception of Corporate Ratings

Jankowitsch

Ottonello²,

Subrahmanyam

2015

SSRN Journal

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We investigate how the informativeness of rating changes varies in different economic and regulatory environments, using the financial crisis and the Dodd-Frank Act as structural changes in the context of the US corporate bond market. Our analysis focuses on testing various hypotheses based on existing models of rating agency behavior. Informativeness is measured through the impact of credit rating changes on the prices and liquidity of corporate bonds, taking differences in their characteristics into account. We find that the informativeness of rating changes is low when the economy is booming and regulation favors better-rated securities, especially when their cost of information acquisition is high. In economic downturns, the informativeness increases in combination with a high level of illiquidity. After the introduction of Dodd-Frank, rating changes became more informative, but not for securities with high information costs and low underlying credit risk.JEL-Classification: G01, G12, G24

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Section: Related Literaturementioning

confidence: 95%

The New Rules of the Rating Game: Market Perception of Corporate Ratings

Jankowitsch

Ottonello²,

Subrahmanyam

2015

SSRN Journal

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“…We also analyze the yield spread responses to rating announcements, similar to previous studies such as Katz (1974) and Ingram et al (1983). Although the literature has commonly analyzed the impact of credit rating announcements on stock prices (see Norden and Weber, 2004), studies that consider bond price reactions to rating changes are less abundant.…”

mentioning

confidence: 83%

“…Earlier studies, such as Weinstein (1977), Wakeman (1978Wakeman ( , 1990 and Zaima and McCarthy (1988), report that CRAs only summarize public information, and changes in bond ratings convey no new information to the market. More recent studies observe abnormal returns on stocks and bonds prices and mostly conclude that rating changes deliver valuable information to the market (see, for example, Ingram et al, 1983;Hand et al, 1992;or Dichev and Piotroski, 2001). Later studies, such as Norden and Weber (2004) and Hull et al (2004), examine the credit default swap CDS market, Steiner and Heinke (2001) consider all three types of rating actions (actual rating changes, watchlist assignments, and outlook assignments), and Jorion and Zhang (2007) analyze the influence of determinant factors like the credit rating prior to the change.…”

Section: Introductionmentioning

confidence: 99%

Credit rating announcements, trading activity and yield spreads: the Spanish evidence

Romero

ndez

2012

IJMEF

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Abstract:We test whether or not different rating announcements contain pricing-relevant information and modify trading activity patterns in the Spanish commercial paper and corporate bond markets. We observe a statistically significant widening of yield spreads in both segments of the corporate debt market after reviews of downgrades and negative outlook reports. In addition, we find that certain rating announcements encourage trading activity even when the information is not pricing-relevant. The release of information arouses investor interest for the involved securities. Thus, trading frequency increases, although larger-sized transactions, which should denote possible portfolio rebalancing, are not observed. In the commercial paper note market, we also find that that trading volumes fade away after reviews for downgrade. Investors seem to prefer reducing the trading of these short-term securities to liquidating their positions.

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“…Previous research along this line can be divided into three branches: The first branch discussed the quality of ratings and addresses the question of whether or not the measurement in the quality of ratings meaningfully reflects what they are supposed to measure (Hickman 1958;Ang and Patel 1975;and Kao and Wu 1990). The second branch examined whether or not ratings reports qualitatively convey information that the market has not already incorporated into prices from other available information (Katz 1974;Grier and Katz 1976;Ingram, Brooks, and Copeland 1983;Weinstein 1977). For example, Hand, Holthausen, and Leftwich (1992) found that ratings do contain information beyond what is publicly available.…”

Section: Literature Reviewmentioning

confidence: 99%

Emergence of Rating Agencies: Implications for Establishing a Regional Rating Agency in Asia

Tsai

Liu

2010

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Asian Development Bank InstituteThe Working Paper series is a continuation of the formerly named Discussion Paper series; the numbering of the papers continued without interruption or change. ADBI's working papers reflect initial ideas on a topic and are posted online for discussion. ADBI encourages readers to post their comments on the main page for each working paper (given in the citation below). Some working papers may develop into other forms of publication. The views expressed in this paper are the views of the authors and do not necessarily reflect the views or policies of ADBI, the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.Asian Development Bank Institute Kasumigaseki Building 8F 3-2-5 Kasumigaseki, Chiyoda-ku Tokyo 100-6008, JapanTel:+81-3-3593-5500 Fax:+81-3-3593-5571 URL:www.adbi.org E-mail: info@adbi.org AbstractThe present analysis sheds light on the setting up a regional rating agency in Asia in the wake of recent financial crisis. We investigate the policy facing a financial regulator while evaluating whether or not to admit new entrants into the credit rating market. In an incomplete contracting framework, we show that an impartial financial regulatory body (represented by a benevolent supranational organization) can facilitate credit ratings of high quality by allowing for the entry of new rating agencies on a non-single basis than it does for a mere single entry. This finding is caused by increased competition among the rating agencies, which induces higher quality of rating services even should rating agencies still exert below their maximum level of efforts.

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The Information Content of Municipal Bond Rating Changes: A Note

Cited by 88 publications

References 6 publications

The New Rules of the Rating Game: Market Perception of Corporate Ratings

The New Rules of the Rating Game: Market Perception of Corporate Ratings

Credit rating announcements, trading activity and yield spreads: the Spanish evidence

Emergence of Rating Agencies: Implications for Establishing a Regional Rating Agency in Asia

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