The impact of rating changes in Australian financial markets
AbstractThis paper tests the response of bond yield spreads and equity prices to credit rating changes in the Australian financial market. Unlike some earlier studies for foreign markets, we find evidence that both yield spreads and equity prices move in the âexpectedâ direction following rating changes. However, the impacts are relatively small. In addition, in the case of downgrades and equity returns, we find evidence of large movements in prices in the six months prior to the rating announcement, suggesting that rating changes are largely validating information that has already been factored into equity prices. We also find that announcement effects are larger for small firms, for re-ratings from investment to speculative grade, and for cases where agencies have not indicated that the rating is under review.
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Bibliographic InfoArticle provided by Elsevier in its journal Pacific-Basin Finance Journal.
Volume (Year): 15 (2007)
Issue (Month): 1 (January)
Contact details of provider:
Web page: http://www.elsevier.com/locate/pacfin
Other versions of this item:
- Adam Creighton & Luke Gower & Anthony Richards, 2004. "The Impact of Rating Changes in Australian Financial Markets," RBA Research Discussion Papers rdp2004-02, Reserve Bank of Australia.
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- G20 - Financial Economics - - Financial Institutions and Services - - - General
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