Advanced

Impacts Of Credit Rating Announcements On Share Price In The NASDAQ Market And The Role Of The Credit Rating Agencies

Michailidis, Alexandros LU and Wu, Wanlin LU (2014) NEKN02 20141
Department of Economics
Abstract
The purpose of this paper is to investigate the response of the stock prices of firms based on NASDAQ Select Market, during the Credit Rating Announcements made by one of the major rating agencies, Standard and Poor’s, before and after the Great Financial Crisis of 2007-2008. The test procedure is the application of the event study by which we are going to investigate whether or how much the markets respond to Credit Rating Announcements. Furthermore, some important added implications would be if the results suggest the existence of an asymmetric response according to the differences between upgrading, stable grading and downgrading, or between firms with different size of capitalization, as well as whether the strength of the response has... (More)
The purpose of this paper is to investigate the response of the stock prices of firms based on NASDAQ Select Market, during the Credit Rating Announcements made by one of the major rating agencies, Standard and Poor’s, before and after the Great Financial Crisis of 2007-2008. The test procedure is the application of the event study by which we are going to investigate whether or how much the markets respond to Credit Rating Announcements. Furthermore, some important added implications would be if the results suggest the existence of an asymmetric response according to the differences between upgrading, stable grading and downgrading, or between firms with different size of capitalization, as well as whether the strength of the response has changed after the 2008.Our empirical research showed that the firms that were assigned negative rating before the financial crisis, experienced a strong negative impact on their stock price. On the contrary, stable grading or up grading have no strong effect. However, it is shown that after the 2008 no Credit Rating Announcement has strong effect on the firms’ stock price. An analysis behind this intuition is provided. (Less)
Please use this url to cite or link to this publication:
author
Michailidis, Alexandros LU and Wu, Wanlin LU
supervisor
organization
course
NEKN02 20141
year
type
H1 - Master's Degree (One Year)
subject
keywords
Credit Rating Announcement, Standard and Poor’s, NASDAQ, Event Study
language
English
id
4467653
date added to LUP
2014-06-17 13:19:29
date last changed
2014-06-17 13:19:29
@misc{4467653,
  abstract     = {The purpose of this paper is to investigate the response of the stock prices of firms based on NASDAQ Select Market, during the Credit Rating Announcements made by one of the major rating agencies, Standard and Poor’s, before and after the Great Financial Crisis of 2007-2008. The test procedure is the application of the event study by which we are going to investigate whether or how much the markets respond to Credit Rating Announcements. Furthermore, some important added implications would be if the results suggest the existence of an asymmetric response according to the differences between upgrading, stable grading and downgrading, or between firms with different size of capitalization, as well as whether the strength of the response has changed after the 2008.Our empirical research showed that the firms that were assigned negative rating before the financial crisis, experienced a strong negative impact on their stock price. On the contrary, stable grading or up grading have no strong effect. However, it is shown that after the 2008 no Credit Rating Announcement has strong effect on the firms’ stock price. An analysis behind this intuition is provided.},
  author       = {Michailidis, Alexandros and Wu, Wanlin},
  keyword      = {Credit Rating Announcement,Standard and Poor’s,NASDAQ,Event Study},
  language     = {eng},
  note         = {Student Paper},
  title        = {Impacts Of Credit Rating Announcements On Share Price In The NASDAQ Market And The Role Of The Credit Rating Agencies},
  year         = {2014},
}