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.

scholarly journals ESG as a Measure of Credit Ratings

Risks ◽  
2021 ◽  
Vol 9 (12) ◽  
pp. 226
Author(s):  
Patrycja Chodnicka-Jaworska
Keyword(s):  
Financial Institutions ◽  
Credit Rating ◽  
Negative Impact ◽  
Credit Ratings ◽  
Stock Exchanges ◽  
Credit Rating Agencies ◽  
Rating Agencies ◽  
Thomson Reuters ◽  
Rating Changes ◽  
The Impact

The aim of this study was to examine the impact of environmental, social, and governance (ESG) measures on credit ratings given to non-financial institutions by the largest credit rating agencies according to economic sector divisions. The hypotheses were as follows: a strong negative impact on non-financial institutions’ credit rating changes will result from ESG risk changes, and the reaction of credit rating changes will vary in different sectors. Panel event models were used to verify these hypotheses. The study used data from the Thomson Reuters Database for the period 2010–2020. The analysis was based on the literature on credit rating determinants and on papers and reports on COVID-19, ESG factors, and their impact on credit rating changes. Linear decomposition was used for the analysis. To verify these hypotheses, long-term issuer credit ratings presented by Moody’s and Fitch for European companies listed on these stock exchanges have been used. In the analyses, financial and non-financial factors were also considered. The results suggested that, within the last year, the methodology presented by credit rating agencies has changed, and ESG factors are one of the basic measures that are used to verify credit rating changes, especially those related to the pandemic.

scholarly journals Does the Financial Status of Company Affect the Bond Credit Rating? ——Empirical Evidence from China's Shanghai and Shenzhen Stock Exchanges

2021 ◽  
Vol 4 (1) ◽  
Author(s):  
Yuyan Cai
Keyword(s):  
Credit Rating ◽  
Credit Ratings ◽  
Corporate Bonds ◽  
Principal Component ◽  
Corporate Bond ◽  
Stock Exchanges ◽  
Analysis Method ◽  
Financial Status ◽  
Financial Variables ◽  
The Impact

This article takes the companies that publicly issued corporate bonds on the Shanghai and Shenzhen Stock Exchanges from 2006 to 2018 as the research objects selecting six aspects that comprehensively reflect the 17 financial variables in 6 aspects: profitability, operating ability, bond repayment ability, development ability, cash flow and market value of the company. Principal component analysis method and factor analysis method are used to extract the principal factors of these financial indicator variables. That is how an ordered multi-classification Logistic regression model is constructed to test the impact of the Shanghai and Shenzhen Stock Exchanges’ financial status on the corporate bond credit rating. It turns out that the financial status of the Shanghai and Shenzhen Stock Exchanges have an important impact on the credit rating of corporate bonds. The financial status has a greater impact on corporate bonds with credit ratings of A- and AA-, while it has a smaller impact on corporate bonds with credit ratings above AA. The results of this article can help individual and institutional investors prevent risks from investing.

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 Stock Market Efficiency in the Time of COVID-19: Evidence from Industry Stock Returns

2020 ◽  
Vol 5 (2) ◽  
pp. 40-44
Author(s):  
Vaibhav Lalwani ◽  
Vedprakash Vasantrao Meshram
Keyword(s):  
Stock Market ◽  
Market Efficiency ◽  
Stock Returns ◽  
Stock Prices ◽  
Statistical Tests ◽  
Jel Classification ◽  
Informational Efficiency ◽  
Classification Code ◽  
Stock Market Efficiency

Using industry portfolios as test assets and a battery of statistical tests, we study if the informational efficiency of stock prices has declined after the COVID-19 crisis began. The results suggest that the predictability of stock returns in some industries has increased during the COVID-19 period. Markets appear to have become less informationally efficient during the COVID-19 crisis. JEL Classification Code: C58, G01, G10, G14.

Epidemics and Chinese firms' stock returns: is COVID-19 different?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Quang Thi Thieu Nguyen ◽  
Dao Le Trang Anh ◽  
Christopher Gan
Keyword(s):  
Stock Returns ◽  
Negative Impact ◽  
Stock Exchange ◽  
Market Performance ◽  
Disease Outbreaks ◽  
Stock Exchanges ◽  
Content Type ◽  
Event Study Method ◽  
Economic Shock ◽  
The Impact

PurposeThis study investigates the Chinese stocks' returns during different epidemic periods to assess their effects on firms' market performance.Design/methodology/approachThe study employs an event study method on more than 3,000 firms listed on Shanghai and Shenzhen stock exchanges during periods of SARS, H5N1, H7N9 and COVID-19FindingsEpidemics' effect on firms' stock returns is persistent up to 10 days after the event dates. Although the impact varies with types and development of the disease, most firms experience a negative impact of the epidemics. Among the epidemics, COVID-19 has the greatest impact, especially when it grows into a pandemic. The epidemics' impact is uneven across industries. In addition, B-shares and stocks listed on Shanghai Stock Exchange are more negatively influenced by the epidemic than A-shares and those listed on Shenzhen Stock Exchange.Research limitations/implicationsThe results of the study contribute to the limited literature on the effects of disease outbreaks as an economic shock on firm market performance. Given the possibility of other epidemics in the future, the study provides guidance for investors in designing an appropriate investing strategy to cope with the epidemic shocks to the market.Originality/valueThe research is novel in the way it compares and assesses the economic impact of different epidemics on firms and considers their impact at different development stages.

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.

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