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Sensitivity of the Central and Eastern European Stock Market to Credit Rating Changes (Wrazliwosc rynku akcji Europy Srodkowo-Wschodniej na zmiany credit ratingow)

Author

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  • Patrycja Chodnicka-Jaworska

    (Faculty of Management, University of Warsaw)

Abstract

The aim of the paper is to verify the influence of credit rating changes on the rates of return on shares taking into account the size of the credit rating agency. A review of literature about the mentioned relationship by type of sector has been prepared. The following hypothesis is proposed: The banks’ share prices show a weaker reaction to credit rating changes than the entities outside the banking sector. The strongest impact of credit rating changes is observed for a downgrade. This hypothesis has been verified by using event study methods on data collected from Thomson Reuters Database through the years 1980 to 2015. The unobserved variables are long term issuer credit ratings given to banks and institutions outside the financial institutions. Rates of return on shares are used as observed variables.

Suggested Citation

  • Patrycja Chodnicka-Jaworska, 2018. "Sensitivity of the Central and Eastern European Stock Market to Credit Rating Changes (Wrazliwosc rynku akcji Europy Srodkowo-Wschodniej na zmiany credit ratingow)," Problemy Zarzadzania, University of Warsaw, Faculty of Management, vol. 16(74), pages 46-61.
    • Handle: RePEc:sgm:pzwzuw:v:16:i:74:y:2018:p:46-61
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    More about this item

    Keywords

    credit ratings; banking sector; non-financial sector; stock prices;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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