Market anticipation and the effect of bond rating changes on common stock prices
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Transmission process and determinants of sovereign credit contagions: Global evidence
2024, International Review of Economics and FinanceInformation effect of credit rating announcements in transition economies
2023, Journal of International Financial Markets, Institutions and MoneyAsymmetric reactions of abnormal audit fees jump to credit rating changes
2023, British Accounting ReviewCredit ratings and predictability of stock return dynamics of the BRICS and the PIIGS: Evidence from a nonparametric causality-in-quantiles approach
2021, Quarterly Review of Economics and FinanceCitation Excerpt :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, Liu, & Shi, 2005). This is also supported by the earlier finding in Hsueh and Liu (1992) of significant abnormal stock price movements in response to both bond rating downgrades and upgrades. Given the mixed evidence in the literature, one possible explanation for the stronger findings observed in the case of upgrades is that rating upgrades are generally harder to anticipate by market participants and includes a greater degree of surprise component compared to anticipated downgrade announcements, thus leading to stronger effects on stock market returns and volatility.
Country and industry effects in corporate bond spreads in emerging markets
2019, Journal of Business ResearchCitation Excerpt :This argument is particularly important for this research as our main objective is to verify not only the extent to which country risk affects net spreads, but also the role of industry risk as an important potential determinant of net spreads. Christopher, Kim, and Wu (2012) examine 19 emerging markets from 1994 to mid-2007 in a panel data framework, and consider not only the effect of sovereign rating changes on bonds, but on stocks, as well (20 years earlier, Hsueh & Liu, 1992, conducted a similar study in the U.S.). They found the existence of a contagion effect regarding changes in sovereign debt ratings in the regions studied and that this effect was not present in the case of stocks.
The information content of issuer rating changes: Evidence for the G7 stock markets
2016, International Review of Financial AnalysisCitation Excerpt :For instance, CAAR for US and Canadian across-class downgrades are − 2.06% and − 3.08%, respectively, which is > 50% higher than CAARs for the respective within-class subsamples. We take this as an indication that investors tend to perceive a deterioration of credit ratings across rating classes as a stronger signal than mere within-class downgrades, which is in line with both Hypothesis 3 and earlier evidence for the US by Holthausen and Leftwich (1986) and Hsueh and Liu (1992). In addition, we observe further differences in the spillover effects of rating downgrades.