Stock market reaction to credit rating changes: new evidence*

Abu S. Amin, Pawan Jain, Mahfuja Malik

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

This study shows how stock market reacts to rating change announcements where confounding effects of information spillover from related markets are absent. Contrary to existing literature, we find that the stock market reacts positively to a rating upgrade and no response to downgrade. Our analysis shows that pre-announcement cumulative abnormal returns can significantly predict announcement period abnormal return. Finally, we document a significant reduction in information asymmetry due to rating upgrade announcements affirming the recent policy initiatives.

Original languageEnglish
Pages (from-to)667-684
Number of pages18
JournalAsia-Pacific Journal of Accounting and Economics
Volume27
Issue number6
DOIs
StatePublished - Nov 1 2020

Keywords

  • Credit rating
  • cumulative abnormal return
  • event study
  • information asymmetry

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