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Stock Market Reaction to the Global Financial Crisis: testing for the Lehman Brothers'Event

Author

Listed:
  • Leonardo Becchetti
  • Rocco Ciciretti

    () (Department of Economics University of Roma Tor Vergata
    SEFeMEQ Department, University of Roma Tor Vergata and EPRU, University of Leicester School of Management)

Abstract

We analyse with an event study approach the stock market reaction to Lehman Brothers' filing for chapter 11. Our inquiry on abnormal returns of about 2,700 stocks around the event date documents that RiskMetrics-KLD indexes capture factors affecting investors' reaction to the shock. We also find that investors rationally attribute more value to the information on each rating domain than to affiliation/non-affiliation to the FTSE KLD 400 Social Index. Investors seem to discover, after the event, that KLD ratings provide original information which is not captured by traditional financial rating indicators.

Suggested Citation

  • Leonardo Becchetti & Rocco Ciciretti, 2011. "Stock Market Reaction to the Global Financial Crisis: testing for the Lehman Brothers'Event," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 70(2), pages 3-58, July.
  • Handle: RePEc:gde:journl:gde_v70_n2_p5-58
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    Cited by:

    1. Becchetti, L. & Ferrari, M. & Trenta, U., 2014. "The impact of the French Tobin tax," Journal of Financial Stability, Elsevier, vol. 15(C), pages 127-148.
    2. Baron David P & Agus Harjoto Maretno & Jo Hoje, 2011. "The Economics and Politics of Corporate Social Performance," Business and Politics, De Gruyter, vol. 13(2), pages 1-48, August.
    3. Marco Nicolosi & Stefano Grassi & Elena Stanghellini, 2014. "Item response models to measure corporate social responsibility," Applied Financial Economics, Taylor & Francis Journals, vol. 24(22), pages 1449-1464, November.
    4. Becchetti, Leonardo & Ciciretti, Rocco & Giovannelli, Alessandro, 2013. "Corporate social responsibility and earnings forecasting unbiasedness," Journal of Banking & Finance, Elsevier, vol. 37(9), pages 3654-3668.

    More about this item

    Keywords

    Global Financial Crisis; Event Study; Corporate Governance; Product Quality; Ratings.;

    JEL classification:

    • 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
    • G01 - Financial Economics - - General - - - Financial Crises

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