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The Effect of Sovereign Credit Ratings on Cds Premiums: An Event Study on Developed and Developing Countries

Author

Listed:
  • Sinem Uçarkaya

    (Başkent University)

  • Şenol Babuşcu

    (Baskent University)

  • Adalet Hazar

    (Baskent University)

Abstract

This study aims to examine whether credit ratings effect country cds premiums in developed and developing countries and whether the effect differs between the two groups. For this purpose, cds premiums of 26 developed and developing countries for the period of january 2005-october 2021, the announcements of credit rating agencies and event analysis methodwere employed. The results show that cds premiums in developed countries are not statistically affected by negative announcements, but the response to positive announcements is statistically significant. On the other hand, cds premiums in emerging countries are significantly affected by both positive and negative rating announcements.

Suggested Citation

  • Sinem Uçarkaya & Şenol Babuşcu & Adalet Hazar, 2022. "The Effect of Sovereign Credit Ratings on Cds Premiums: An Event Study on Developed and Developing Countries," Journal of Finance Letters (Maliye ve Finans Yazıları), Maliye ve Finans Yazıları Yayıncılık Ltd. Şti., vol. 37(117), pages 135-158, April.
    • Handle: RePEc:acc:malfin:v:37:y:2022:i:117:p:135-158
    DOI: https://doi.org/10.33203/mfy.1067002
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    More about this item

    Keywords

    Credit rating announcement; CDS premium; event study; sovereign credit rating;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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