Market Impact Under a New Regulatory Regime: Credit Rating Agencies in Europe

34 Pages Posted: 30 Jun 2015

See all articles by Rasha Alsakka

Rasha Alsakka

Bangor Business School

Owain Ap Gwilym

Bangor Business School

Patrycja Klusak

Norwich Business School

Vu Tran

Swansea University - School of Management

Date Written: July 2015

Abstract

We investigate whether there are any identifiable differences in market perceptions of rating news released by Moody's, S&P and Fitch following the establishment of a new regulatory regime in July 2011, when the European Securities and Markets Authority assumed responsibility for rating agencies' regulation in Europe. We focus the analysis on the impact of bank rating actions on stock returns and volatility during 2008–2013. Among the intended effects of the new regulatory regime are higher rating quality and enhanced market stability, yet we find very mixed evidence. Many differentials in market responses across CRAs are identified, which mean that a consistent effect of the new regulatory regime is not discernible.

Suggested Citation

Alsakka, Rasha and ap Gwilym, Owain and Klusak, Patrycja and Tran, Vu, Market Impact Under a New Regulatory Regime: Credit Rating Agencies in Europe (July 2015). Economic Notes, Vol. 44, Issue 2, pp. 275-308, 2015. Available at SSRN: https://ssrn.com/abstract=2624831 or http://dx.doi.org/10.1111/ecno.12039

Rasha Alsakka (Contact Author)

Bangor Business School ( email )

Bangor Business School
College Road
Gwynedd LL57 2DG, Wales LL57 2DG
United Kingdom

Owain Ap Gwilym

Bangor Business School ( email )

Bangor Business School
College Road
Gwynedd LL57 2DG, Wales LL57 2DG
United Kingdom

HOME PAGE: http://www.bangor.ac.uk/business/staff/owain_ap_gwilym.php.en

Patrycja Klusak

Norwich Business School ( email )

Norwich Research Park
Norwich, Norfolk NR4 7TJ
United Kingdom

HOME PAGE: http://https://www.uea.ac.uk/norwich-business-school/people/profile/p-klusak

Vu Tran

Swansea University - School of Management

Haldane Building
Singleton Park
Swansea, SA2 8PP
United Kingdom

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