Rating Changes Across Europe

32 Pages Posted: 2 Dec 2009 Last revised: 17 Dec 2009

See all articles by Federico Calderoni

Federico Calderoni

affiliation not provided to SSRN

Paolo Colla

Bocconi University - Department of Finance; Bocconi University - BAFFI Center on International Markets, Money, and Regulation

Stefano Gatti

Bocconi University - Department of Finance

Date Written: November 30, 2009

Abstract

How do European stocks react to rating actions issued by Rating Agencies using a Pan-European sample of more than 500 credit rating changes released by Moody’s in the period 2002-2007 we show that the reaction to rating changes is asymmetric. Downgrades negatively affect equity value and upgrades show no significant impact on stock prices. Moreover, we find that the prior credit quality and the magnitude of the rating change mitigate this asymmetry. The negative impact of downgrades is more intense in non-UK firms and for non-financial companies suggesting lower asymmetric information or higher disclosure in UK than in other European countries.

Keywords: rating changes, abnormal returns, event study

JEL Classification: G14, G15

Suggested Citation

Calderoni, Federico and Colla, Paolo and Gatti, Stefano, Rating Changes Across Europe (November 30, 2009). Available at SSRN: https://ssrn.com/abstract=1515988 or http://dx.doi.org/10.2139/ssrn.1515988

Federico Calderoni

affiliation not provided to SSRN ( email )

Paolo Colla (Contact Author)

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

Bocconi University - BAFFI Center on International Markets, Money, and Regulation ( email )

Milano, 20136
Italy

Stefano Gatti

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

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