The Market Impact of Relative Agency Activity in the Sovereign Ratings Market

:  Using a sample of 101 countries, over the period 1990 to 2006, we assess the relative credit‐rating activity of the major agencies at the sovereign level. Informed by this preliminary analysis, we then examine the market impact of rating actions (ratings changes, watch procedures and outlooks), a...

Full description

Saved in:
Bibliographic Details
Published in:Journal of business finance & accounting 2010-11, Vol.37 (9-10), p.1309-1347
Main Authors: Hill, Paula, Faff, Robert
Format: Article
Language:English
Subjects:
Agency
Capital market
Credit rating
Credit ratings
credit watch
Economic crisis
Financial intermediaries
Impact analysis
information
Manycountries
rating change
Rating services
Securities markets
sovereign
Stock exchange
Stock exchange quotation
Studies
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary::  Using a sample of 101 countries, over the period 1990 to 2006, we assess the relative credit‐rating activity of the major agencies at the sovereign level. Informed by this preliminary analysis, we then examine the market impact of rating actions (ratings changes, watch procedures and outlooks), allowing for various interactions across raters and rating events. Additionally, we carry out a separate analysis of crisis periods. We find that Standard and Poor's tend to be more active, provide more timely rating assessments and offer more new information than either Fitch or Moody’s. We find evidence of specialisation, however, among agencies, with Moody’s, for example, being the ‘leading’ agency among IMF ‘advanced economies’. In line with our rating activity analysis, we find some evidence of stronger reaction to changes in Standard and Poor's rating assessments than in those of the other agencies. We also find evidence that credit‐outlook and credit‐watch events are more timely and more informative than downgrades and upgrades, and that, as anticipated, reactions are stronger during crisis periods, but that events remain informative outside crisis periods.
ISSN:0306-686X
1468-5957
DOI:10.1111/j.1468-5957.2010.02220.x