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The Impact of Sovereign Credit Signals on Bank Share Prices during the European Sovereign Debt Crisis

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Author Info

  • Gwion Williams

    ()
    (Bangor University)

  • Rasha Alsakka

    ()
    (Bangor Business School)

  • Owain ap Gwilym

    ()
    (Bangor Business School)

Abstract

The ongoing financial crisis has drawn attention to the role of credit rating agencies (CRAs). We investigate the relative impacts of sovereign actions by different CRAs on the share prices of major European banks during the financial crisis. We examine how bank abnormal returns are affected by sovereign rating changes, watch and outlook announcements, to capture how the crisis spills over across countries and from the sovereign to the financial sector. We find that CRAs’ signals affect share prices, although there is no evidence that CRA actions are the dominant force leading to falling share prices during the crisis.

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Bibliographic Info

Paper provided by Bangor Business School, Prifysgol Bangor University (Cymru / Wales) in its series Working Papers with number 13007.

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Length: 35 pages
Date of creation: Oct 2013
Date of revision:
Handle: RePEc:bng:wpaper:13007

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Related research

Keywords: European sovereign debt crisis; Credit signals; Spillover effect; Credit outlook/watch; Bank shares;

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