The Market Impact of Relative Agency Activity in the Sovereign Ratings Market
affiliation not provided to SSRN
Robert W. Faff
University of Queensland; Financial Research Network (FIRN)
Journal of Business Finance & Accounting, Vol. 37, No. 9-10, pp. 1309-1347, 2010
Using a sample of 101 countries, over the period 1990 to 2006, we assess the relative credit-rating activity of the major agencies at the sovereign level. Informed by this preliminary analysis, we then examine the market impact of rating actions (ratings changes, watch procedures and outlooks), allowing for various interactions across raters and rating events. Additionally, we carry out a separate analysis of crisis periods. We find that Standard and Poor's tend to be more active, provide more timely rating assessments and offer more new information than either Fitch or Moodys. We find evidence of specialisation, however, among agencies, with Moodys, for example, being the leading agency among IMF advanced economies. In line with our rating activity analysis, we find some evidence of stronger reaction to changes in Standard and Poor's rating assessments than in those of the other agencies. We also find evidence that credit-outlook and credit-watch events are more timely and more informative than downgrades and upgrades, and that, as anticipated, reactions are stronger during crisis periods, but that events remain informative outside crisis periods.
Number of Pages in PDF File: 39
Keywords: credit rating, rating change, credit watch, information, sovereignAccepted Paper Series
Date posted: January 1, 2011
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo1 in 0.609 seconds