Market Reaction to Credit Rating Announcements in the Irish Stock Market

40 Pages Posted: 27 Jan 2004

See all articles by Charlie Charoenwong

Charlie Charoenwong

Nanyang Technological University (NTU)

Xiang Hong Li

Massey University - Department of Commerce

Nuttawat Visaltanachoti

Massey University - Department of Economics and Finance

Date Written: January 2004

Abstract

The topic of whether credit rating announcements are informational is becoming an internationally debated subject. There are, however, no conclusive findings up to now. Unlike previous studies that are largely based on large stock markets this research, by assessing the market abnormal returns, examines whether credit rating announcements convey more valuable information to investors in a relative small market, the Irish stock market, than to investors in a large market. This study finds evidence that is consistent with US, UK and Australian studies. These studies show that only bad news is associated with significant negative market abnormal returns. The findings suggest that only negative credit announcements providing a certification function are informational. Moreover, the cross-sectional multivariate test results suggest that a firm's leverage measured by the debt-to-asset ratio is essentially an important factor in relating a firm's abnormal returns due to credit rating announcement releases.

Keywords: Credit Rating, Irish

JEL Classification: G14

Suggested Citation

Charoenwong, Charlie and Li, Xiang Hong and Visaltanachoti, Nuttawat, Market Reaction to Credit Rating Announcements in the Irish Stock Market (January 2004). Available at SSRN: https://ssrn.com/abstract=488243 or http://dx.doi.org/10.2139/ssrn.488243

Charlie Charoenwong

Nanyang Technological University (NTU) ( email )

Nanyang Business School, BF Division
S3-01c-104
Singapore, 639798
Singapore
+65 6790 4799 (Phone)
+65 6791 3697 (Fax)

Xiang Hong Li

Massey University - Department of Commerce ( email )

Auckland
New Zealand

Nuttawat Visaltanachoti (Contact Author)

Massey University - Department of Economics and Finance ( email )

School of Economics and Finance
Private Bag 102904, NSMC
Auckland
New Zealand
64 9 414 0800 (43169) (Phone)
64 9 441 8177 (Fax)

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