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Market Efficiency, Sovereign Debt Restructuring And Credit Ratings In Developing Countries

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  • C. Justin ROBINSON
  • Prosper F. BANGWAYO-SKEETE

Abstract

The paper investigates the investor’s sensitivity to the announcements of nine sovereign debt restructurings and 50 credit rating reviews on six stock markets across the Caribbean. Using event study methodology, while controlling for thin-trading, the study found no stock price reaction to the credit rating announcements that occurred over 2000-2015. Prices on the Jamaica Stock Exchange, however, reacted to the announcement of two sovereign debt restructurings. In one case, the stock price reaction was delayed and protracted, which is inconsistent with semi-strong form market efficiency. This requires policymakers and practitioners to exercise caution in utilizing stock markets information for policymaking.

Suggested Citation

  • C. Justin ROBINSON & Prosper F. BANGWAYO-SKEETE, 2017. "Market Efficiency, Sovereign Debt Restructuring And Credit Ratings In Developing Countries," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 17(1), pages 5-18.
    • Handle: RePEc:eaa:aeinde:v:17:y:2017:i:1_1
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    References listed on IDEAS

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    Cited by:

    1. ROBINSON, C. Justin & BANGWAYO-SKEETE, Prosper, F., 2018. "The Information Content Of Dividend Announcements: Evidence From Frontier Markets With Varying Tax Regimes In Jamaica And Trinidad And Tobago, 2001-2017," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 18(2), pages 73-86.

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    More about this item

    Keywords

    debt restructuring; credit ratings; thin trading; stock market efficiency; developing countries;
    All these keywords.

    JEL classification:

    • G - Financial Economics

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