Credit rating changes and their impact on equity prices

: how much should banks care? : event study in stock markets

Abstract

This dissertation investigates the existence of abnormal returns in a sample of 48 banks following credit rating changes done by S&P to those banks and to their sovereigns – a total of 10 countries – between 2008 and 2012. We analyse three types of effects: first, bank rating changes’ impact on its own stock price; second, sovereign rating downgrades’ impact on banks’ stock prices (national and foreign); third, bank rating downgrades’ impact on non-downgraded banks’ equity prices. The impacts are seldom significant: a departure from existing literature that may result from the usage of a test statistic robust to cross-correlation and event-induced volatility effects, or from time series differences.

Date of Award	2013
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Pramuan Bunkanwanicha (Supervisor)