The Impact of Credit Watch and Bond Rating Changes on Abnormal Stock Returns for Non-USA Domiciled Corporations

In this paper, we investigate whether credit watches and bond rating changes issued by Moodys' and S&P Credit Rating Agencies provide significant new information to investors for Non-USA domiciled corporations. We also examine whether the stock related cumulative abnormal return (CAR) diffe...

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主要作者: EE, Benjamin Boon Ching
格式: text
語言:English
出版: Institutional Knowledge at Singapore Management University 2008
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在線閱讀:https://ink.library.smu.edu.sg/etd_coll/44
https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1043&context=etd_coll
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機構: Singapore Management University
語言: English
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總結:In this paper, we investigate whether credit watches and bond rating changes issued by Moodys' and S&P Credit Rating Agencies provide significant new information to investors for Non-USA domiciled corporations. We also examine whether the stock related cumulative abnormal return (CAR) differs according to the classification of the country of domicile (emerging or developed) of the corporation, and varies by state of the local stock market during the time of the rating event.We find that on average, negative credit watches as well as long term rating downgrades result in significant stock related CAR for Non-USA domiciled 4 corporations. However, positive credit watches and long term rating upgrades generally do not result in significant stock related CAR. On average, we find that negative credit watches result in a stock related CAR of -1.37% within the (-1, +1) window centered around the watch issuance, while long term rating downgrades result in a stock related CAR of -1.33% within the (-1, +1) window centered around the downgrade. Developed markets generally exhibit a stronger reaction. Negative watch in developed markets have a stock related CAR of -1.44%, compared to only -0.88% for emerging markets. The picture is similar for long term rating downgrades. Downgrades in developed markets have a stock related CAR of -1.47%, compared to only -0.76% for emerging markets. This paper provides evidence that credit rating agencies are able to provide new information to investors outside of companies domiciled in the USA.