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

Author

Listed:
  • 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.

Suggested Citation

  • Gwion Williams & Rasha Alsakka & Owain ap Gwilym, 2013. "The Impact of Sovereign Credit Signals on Bank Share Prices during the European Sovereign Debt Crisis," Working Papers 13007, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
  • Handle: RePEc:bng:wpaper:13007
    as

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    File URL: http://www.bangor.ac.uk/business/research/documents/BBSWP13007.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

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

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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