Information Content of Credit Rating Affirmations

40 Pages Posted: 31 Mar 2020

See all articles by Boochun Jung

Boochun Jung

University of Hawaii at Manoa - School of Accountancy

Byungki Kim

University of Queensland - Business School

You-il (Chris) Park

University of Hawaii at Manoa - School of Accountancy

Jian Zhou

University of Hawaii at Manoa

Date Written: March 3, 2020

Abstract

We study whether credit rating affirmations affect stock investors. In a sample of U.S. corporate credit ratings over the period 1995-2018, we find that information uncertainty proxied by analyst forecast dispersion and stock return volatility decreases within a 30-day window following the rating affirmation announcements. The reduction in information uncertainty is mainly driven by non-investment grade bond issuers, whereas such reduction is not statistically significant for investment-grade bond issuers. We also find that the stock market reaction to rating affirmations for the non-investment issuers is significantly positive. Our findings uncover a previously unexplored benefit of rating affirmations to stock market participants.

Keywords: credit rating affirmations; information content

JEL Classification: G14; G20; G24

Suggested Citation

Jung, Boochun and Kim, Byungki and Park, You-il (Chris) and Zhou, Jian, Information Content of Credit Rating Affirmations (March 3, 2020). Available at SSRN: https://ssrn.com/abstract=3549667 or http://dx.doi.org/10.2139/ssrn.3549667

Boochun Jung

University of Hawaii at Manoa - School of Accountancy ( email )

College of Business Administration
Honolulu, HI 96822
United States

Byungki Kim

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

You-il (Chris) Park

University of Hawaii at Manoa - School of Accountancy ( email )

2404 Maile Way, C-402b
Honolulu, HI 96822
United States
8089567028 (Phone)

HOME PAGE: http://shidler.hawaii.edu/chris-park

Jian Zhou (Contact Author)

University of Hawaii at Manoa ( email )

Honolulu, HI 96822
United States

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