scholarly journals What moves stock prices around credit rating changes?

2021 ◽  
Author(s):  
Omri Even-Tov ◽  
Naim Bugra Ozel
Keyword(s):  
Stock Prices ◽  
Credit Rating ◽  
Rating Changes

scholarly journals Credit Rating Changes and Stock Market Reaction in the Kingdom of Bahrain

2016 ◽  
Vol 8 (8) ◽  
pp. 23 ◽  
Author(s):  
Marwan M. Abdeldayem ◽  
Ramzi Nekhili
Keyword(s):  
Stock Market ◽  
Event Study ◽  
Stock Prices ◽  
Banking Sector ◽  
Credit Rating ◽  
Market Reaction ◽  
Stock Market Reaction ◽  
Rating Changes ◽  
The Impact

<p>Between 2014 and 2015, the oil price almost halved. Since then, it has fallen a further 40%. Consequently, Moody’s Investors Service has downgraded Bahrain’s long-term issuer rating from Baa3 to Ba1with a negative outlook and placed it on review for further downgrade. In this context, previous literature reaches no agreement about the impact of credit rating changes on stock prices. Some studies indicate that credit rating changes do not affect stock prices, while others conclude they do. Therefore, this study aims to examine whether credit rating change has a significant impact on Bahraini stock prices. We conducted an event study to analyze stock market reaction to such news in the Kingdom of Bahrain. Even though Bahrain has witnessed a series of sovereign downgrades over the past five years, the latest downgrading event in February 17, 2016, has been followed by a credit rating downgrade of its banking sector in March 7, 2016. Hence the choice of the sample period of the event study includes both these downgrading events over the period of study from January 2, 2014 till March 22, 2016. Three sectors were selected from the Bahrain all share index: banks, service and industrial. The findings of the study reveal that sovereign rating downgrade has some mixed pre-announcement and post-announcement effects and credit rating downgrade provides useful information. Overall, the results indicate that downgrades and negative outlook announcements have an adverse impact on long-term equity returns, but little impact on short-term performance.</p>

scholarly journals A Multi-Country Study of Factors Affecting Credit Ratings Revisions

2021 ◽  
Vol 21 (3) ◽  
pp. 1424-1443
Author(s):  
Angeline Siew-Huan Ng ◽  
Mohamed Ariff Syed Mohamed
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Credit Rating ◽  
Price Changes ◽  
Factors Affecting ◽  
Listed Firms ◽  
New Findings ◽  
Specific Factors ◽  
Rating Changes ◽  
Corporate Credit Rating

This paper reveals findings from extending corporate credit rating studies towards (i) new ratings, affirmation, confirmation, watchlists, and withdrawal, which together represent five out of eight rating types yet to be studied rigorously (there are several papers on upgrades and downgrades); and (ii) identifying key firm-specific factors affecting stock prices around the rating revisions in markets not yet studied. The firmspecific factor effects are measured using the Ordered Probit methodology. Results show that investment and speculation grade issues have the most pronounced effects on price changes. Further findings are: interest-coverage, profitability and leverage ratios, all of which stand out as the most relevant firm-specific factors correlated with stock price changes. An interesting new finding is the discovery of corruption perception scores as a new measure is significantly influencing affirmation, confirmation and downgrade ratings. These new findings are likely to be of interest to investors, corporations wanting to know rating change effects and the external regulators concerned with financial weaknesses/strengths of listed firms facing rating changes.

scholarly journals Impacts of credit rating changes on stock returns

2020 ◽  
Vol 2 (1) ◽  
Author(s):  
Pham Quynh Chau ◽  
Nguyen Thu Hien
Keyword(s):  
Market Efficiency ◽  
Stock Returns ◽  
Stock Prices ◽  
Credit Rating ◽  
Credit Ratings ◽  
Stock Exchanges ◽  
Listed Firms ◽  
Stock Market Efficiency ◽  
Rating Changes ◽  
The Impact

This paper studies the impact of credit ratings issued by CIC, a Vietnamese local rating agency, on stock returns of listed companies on the Vietnamese stock exchanges in the period of 2007-2010. The findings of the study confirm the assertions of the previous researches by Holthausen and Leftwich (1986), Hand, Holthausen and Leftwich (1992), Chan and Poor (2008). Specifically, CIC’s credit ratings slightly affect the stock prices of the listed firms, an evidence supporting CIC’s role and its rating quality to a certain extent. This paper also confirms semi-strong form of the Vietnamese stock market efficiency.

Corporate Financing in Anticipation of Credit Rating Changes

2013 ◽  
Author(s):  
Anurag Narayan Banerjee ◽  
Chi-Hsiou Daniel Hung ◽  
Qingrui Meng
Keyword(s):  
Credit Rating ◽  
Corporate Financing ◽  
Rating Changes

Credit Rating Changes and Insider Trading

2017 ◽  
Vol 30 (4) ◽  
pp. 1457-1478
Author(s):  
Injoong Kim ◽  
Taekyu Kim
Keyword(s):  
Insider Trading ◽  
Credit Rating ◽  
Rating Changes

scholarly journals Impact of Sovereign Debt Credit Rating Revision on Banking Industry: Evidence from G7 Countries

2019 ◽  
Vol 8 (2) ◽  
pp. 85-100
Author(s):  
Reza Tahmoorespour ◽  
Mohamed Ariff ◽  
Alireza Zarei
Keyword(s):  
Sovereign Debt ◽  
Credit Rating ◽  
Banking Industry ◽  
Information Leakage ◽  
Market Prices ◽  
New Findings ◽  
Price Effects ◽  
Study Methodology ◽  
Rating Changes ◽  
Event Study Methodology

Abstract The aim of this study is to identify the economic impacts on G7 banking industry when sovereign rating is revised. We used event study methodology (t-statistics) and found that sovereign rating changes significantly affect share market prices. It seems that there is information leakage prior to sovereign rating announcement dates as released by the S&P: there are some negative price effects as well on mixed-type rating change effects, such as ‘rating watch’ announcements. These are new findings that may help to extend the sovereign rating literature in terms of findings from multiple countries, and on sustainability of debt taking.

scholarly journals Impacto dos Ratings de crédito nas ações de empresas de capital aberto no Brasil

2017 ◽  
Vol 16 (2) ◽  
pp. 573-602
Author(s):  
Rafaela Augusta Cunha Silveira ◽  
Renata Turola Takamatsu ◽  
Bruna Camargos Avelino
Keyword(s):  
Stock Prices ◽  
Credit Rating ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Final Analysis ◽  
Share Prices ◽  
New Information ◽  
Agency Issues ◽  
Study Methodology ◽  
The Impact

Resumo O rating de crédito expressa uma opinião, por intermédio de escalas, sobre a qualidade do crédito de empresas, utilizado-a como medida de avaliação de risco no mercado. Agências de classificação de risco de crédito, como a Moody’s, divulgam os ratings que atribuem às empresas. Primeiramente, essas agências emitem o new rating, que representa o primeiro rating da companhia, e, posteriormente, essa emissão pode apresentar variações, denominadas upgrades e downgrades, relativas a boas e más notícias, respectivamente. Além disso, os ratings podem ser colocados em uma Watchlist quando, em breve, pode haver uma mudança do rating para downgrade ou para upgrade. O objetivo com este estudo consistiu, diante do que foi tratado, em abordar o impacto do rating de crédito sobre os preços das ações de empresas listadas na bolsa de valores brasileira. Para alcançar o objetivo proposto, foi analisada uma amostra de 44 empresas comercializadas na BM&FBovespa e 65 ratings nacionais de longo prazo emitidos pela Moody’s entre 2000 e 2015. Utilizou-se a metodologia de estudo de eventos, com os retornos normais calculados pelo modelo de retornos ajustados ao risco e ao mercado, e o Teste-F e o Teste-T para verificar a significância dos resultados. As análises finais evidenciaram que os preços das ações não são afetados de forma significativa pelas divulgações dos new ratings, downgrades, upgrades, on watch – possible downgrades e on watch – possible upgrades em nenhuma janela do evento, indicando que os ratings, para a amostra analisada, não trazem novas informações ao mercado.Palavras-chave: Ações. Rating. Estudo de eventos. Retornos anormais. Abstract Credit ratings are used as a mean to investors get new information on the companies by reducing the information asymmetry in the market. Thus, the rating is an important mean of business information with investors, enabling share prices relating to companies react to it. Branches of credit rating as Moody's, disclose the ratings they assign to companies. First, the agency issues the new rating, which represents the company's first rating, then this issue may vary, upgrades and downgrades calls relating to good and bad news respectively. In addition, the ratings could be placed in a Watchlist when, soon there may be a change to the rating downgrade or upgrade. The purpose of this study was to discuss the impact that the credit rating has on stock prices of companies listed on the Brazilian stock exchange. For a sample of 44 companies traded on BM&FBovespa and 65 long-term national ratings issued by Moody's between 2000 and 2015, we used the event study methodology, with normal returns calculated by the model of returns adjusted for risk and market the F-Test and T-Test to test the significance of the results. The final analysis showed that stock prices are not significantly affected by the disclosures of new ratings, downgrades, upgrades, on watch – possible downgrades and on watch – possible upgrades in any event window, indicating that the ratings do not bring new information to the market.Keywords: Stocks. Rating. Event studies. Abnormal returns.

scholarly journals Credit Rating Changes and Subordinated Bond Spread: Evidence from China

2015 ◽  
Vol 2 (1) ◽  
pp. 1
Author(s):  
Robin Hang Luo ◽  
Jiaji Hao
Keyword(s):  
Credit Rating ◽  
Informational Content ◽  
Credit Rating Agencies ◽  
Sample Period ◽  
Bond Rating ◽  
Rating Agencies ◽  
Rating Changes ◽  
Statistical Results

We examine the bond spread reaction to subordinated bond rating changes during the sample period of 2006 to 2011 and find that bond spread reacted positively to downgrades, big in magnitude, but not statistically significant. The bond spread reaction to upgrades, however, was mixed and statistically insignificant, and small in magnitude. We conjecture that the insignificant statistical results regarding the effect of rating changes may be due to the lack of informational content of the ratings assigned to the subordinated bonds by Chinese credit rating agencies (CRAs). 

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