Dissertation/Thesis Abstract

The impact of credit watch & bond rating changes on abnormal stock returns for Non-USA domiciled corporations
by Ee, Benjamin, M.Sc., Singapore Management University (Singapore), 2008, 90; 1478221
Abstract (Summary)

In this paper, we investigate whether credit watches and bond rating changes issued by Moodys’ and S&P Credit Rating Agencies provide significant new information to investors for Non-USA domiciled corporations. We also examine whether the stock related cumulative abnormal return (CAR) differs according to the classification of the country of domicile (emerging or developed) of the corporation, and varies by state of the local stock market during the time of the rating event.

We find that on average, negative credit watches as well as long term rating downgrades result in significant stock related CAR for Non-USA domiciled corporations. However, positive credit watches and long term rating upgrades generally do not result in significant stock related CAR. On average, we find that negative credit watches result in a stock related CAR of -1.37% within the (-1, +1) window centered around the watch issuance, while long term rating downgrades result in a stock related CAR of -1.33% within the (-1, +1) window centered around the downgrade. Developed markets generally exhibit a stronger reaction. Negative watch in developed markets have a stock related CAR of -1.44%, compared to only -0.88% for emerging markets. The picture is similar for long term rating downgrades. Downgrades in developed markets have a stock related CAR of -1.47%, compared to only -0.76% for emerging markets. This paper provides evidence that credit rating agencies are able to provide new information to investors outside of companies domiciled in the USA.

Indexing (document details)
Advisor: Chiyachantana, Chiraphol New
Commitee:
School: Singapore Management University (Singapore)
Department: Lee Kong Chian School of Business
School Location: Republic of Singapore
Source: MAI 48/06M, Masters Abstracts International
Source Type: DISSERTATION
Subjects: Finance, Banking
Keywords: Credit ratings, Cumulative abnormal return (CAR), Investment analysis, Rate of return, Stocks
Publication Number: 1478221
ISBN: 9781124081045
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