The purpose of this study is to examine how credit rating agencies’ decisions impact the stock market using a systematic and quantitative review of existing empirical studies. Specifically, we employ a meta‐regression analysis (MRA) to investigate the extent and nature of the effect of rating agencies’ decisions on the stock market. We survey 62 studies published between 1978 and 2015. Our first finding is that the cumulative average abnormal returns calculated from this empirical literature are affected by publication bias. After controlling for publication bias, the main findings of our meta‐analysis indicate that negative rating decisions cause statistically significant negative abnormal returns. This evidence suggests an informational effect. Our results also indicate that positive rating decisions do not have a significant effect. Finally, the MRA results reveal the importance of several factors related to primary study design, as well as to the nature of the data.

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This study has two purposes: 1 To present an alternative method for the study of events related to bond spreads applicable when only a small number of events is available; 2 To analyse the impact of downgradings and upgradings on the French financial market. A small number of events can render the use of traditional methods based on the analysis of abnormal returns difficult. We suggest examining the stationarity of relative spreads and dating a possible interruption in the series by carrying out tests in increasingly wider time windows. This method has been applied to assess the role of rating agencies in the French financial market. The results obtained are, in general, not only similar to those previously obtained in other markets, but also more accurate. The aggregate analysis shows an absence of reaction for upgradings while downgradings determine reaction on financial markets. However, if we expand the analysis to single issuers we find that downgradings had no relevant effect on financial markets in most cases. Only two issuers (France Telecom and Vivendi), with initially good, but rapidly deteriorating, credit reputation, experienced a significant rise of their spreads. In these cases, financial markets reacted prior to the downgrading by the agency. Tests based only on the analysis of the whole events would have led us, in the case of downgradings, to partially flawed conclusions. (

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Rating and the french primary bond market A linear multiple econometric study has been carried out in order to show and analyse the caracteristics of the relationship between the risk premium required by markets when issuing bonds and bond rating in France over the 1987-1993 period. These analyses show significant differences in risk premiums according to their rating. Moreover, they show that this relationship is unstable over time (1991 appears as a turning point), that it changes considerably according to the issue amount, and finally that it shows some differences according to the rating agency.