The price impact of rating announcements: which announcements matter?
AbstractCredit rating agencies make multiple announcements, some of which are intended to reflect the latest information available about a firm and others of which are intended to provide a stable signal of credit quality. Using data on CDS spreads, we examine which of these different types of rating announcements contains pricingrelevant information. We find that all types, including changes in outlook, have a significant impact on CDS spreads. Even rating announcements preceded by similar announcements have an impact. The price impact is greatest for firms with split ratings, smallcap firms and firms rated near the threshold of investment grade.
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Bibliographic InfoPaper provided by Bank for International Settlements in its series BIS Working Papers with number 207.
Length: 31 pages
Date of creation: Jun 2006
Date of revision:
credit default swaps; credit ratings; event study; market reaction;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-06-18 (All new papers)
- NEP-FMK-2007-06-18 (Financial Markets)
- NEP-MST-2007-06-18 (Market Microstructure)
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