The impact of credit rating changes in Latin American stock markets

Freitas, Abner de Pinho Nogueira; Minardi, Andréa Maria Accioly Fonseca

doi:10.1590/s1807-76922013000400005

Cited by 23 publications

(38 citation statements)

References 14 publications

(27 reference statements)

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“…The negative market reaction to a sukuk credit rating downgrade is in line with previous studies in bond markets in both developed and developing markets (Bissoondoyal‐Bheenick & Brooks, ; El Doma & Omar, ; Freitas & Minardi, ; Matthies, ). The negative CAAR is recorded from day −3, and this reaction might be because of an information leak.…”

Section: Resultssupporting

confidence: 89%

View from practice: Stock market reaction to sukuk credit rating changes in Malaysia

Sori

Mohamad

Homsi

2019

Thunderbird Intl Bus Rev

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Documented evidence on conventional bond markets shows negative market reaction to bond credit rating downgrade and no reaction to credit rating upgrade. Despite the fact that sukuk issuances make up more than 58.8% of the value of outstanding bonds in the country and Malaysia issues at least half of the world's sukuk and is widely recognized as a leader in the sukuk space, there is no documented evidence on the stock market reaction to sukuk credit rating changes. This study analyzed the wealth effect of sukuk credit rating changes in Malaysia using 16 sukuk upgrades and 20 sukuk downgrades for the period 2000–2014. The evidence shows negative market reaction to downgrades and positive significant reaction to sukuk rating upgrade. This symmetrical market reaction to sukuk credit rating changes implies the market was indifferent between bonds and sukuk from the credit rating perspective. This finding supports the notion that the credit rating agencies are Shariah‐neutral when rating these capital market instruments.

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Section: Resultssupporting

confidence: 89%

View from practice: Stock market reaction to sukuk credit rating changes in Malaysia

Sori

Mohamad

Homsi

2019

Thunderbird Intl Bus Rev

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“…According to Ford, Jackson and Skinner (2010) and Freitas and Minardi (2013) the choice of the window should neither be too long nor too small such that it does not encompass other events and fails to capture abnormality in prices. Also, the literature does not seem to have a consensus in defining the event window.…”

Section: Methodsmentioning

confidence: 99%

Credit Rating Changes and Stock Market Reaction in the Kingdom of Bahrain

Abdeldayem¹,

Nekhili²

2016

IJEF

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Between 2014 and 2015, the oil price almost halved. Since then, it has fallen a further 40%. Consequently, Moody's Investors Service has downgraded Bahrain's long-term issuer rating from Baa3 to Ba1with a negative outlook and placed it on review for further downgrade. In this context, previous literature reaches no agreement about the impact of credit rating changes on stock prices. Some studies indicate that credit rating changes do not affect stock prices, while others conclude they do. Therefore, this study aims to examine whether credit rating change has a significant impact on Bahraini stock prices. We conducted an event study to analyze stock market reaction to such news in the Kingdom of Bahrain. Even though Bahrain has witnessed a series of sovereign downgrades over the past five years, the latest downgrading event in February 17, 2016, has been followed by a credit rating downgrade of its banking sector in March 7, 2016. Hence the choice of the sample period of the event study includes both these downgrading events over the period of study from January 2, 2014 till March 22, 2016. Three sectors were selected from the Bahrain all share index: banks, service and industrial. The findings of the study reveal that sovereign rating downgrade has some mixed pre-announcement and post-announcement effects and credit rating downgrade provides useful information. Overall, the results indicate that downgrades and negative outlook announcements have an adverse impact on long-term equity returns, but little impact on short-term performance.

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“…Isso quer dizer que, caso haja uma melhora na solvência de crédito da empresa, ocorrerá um upgrade e, caso contrário, um downgrade. Segundo Murcia (2013), o new rating (o primeiro rating emitido) de uma companhia ou de uma emissão e, também, as suas revisões, podem ser distintos, dependendo da agência que o atribui, ou seja, é possível que uma única empresa ou emissão possa ter avalições diferentes, já que existem várias agências de classificação de crédito.…”

Section: As Agências De Ratingunclassified

“…Segundo Fernandes (2013), nessa janela examina-se o comportamento da volatilidade do preço das ações e, assim, observa-se se ela retornará à normalidade.…”

Section: Estudo De Eventosunclassified

“…Murcia (2013) afirma que as agências são um meio importante para mediar os emissores e os investidores, em decorrência da colaboração que elas têm para o bom andamento do mercado financeiro conforme ajudam na redução da assimetria informacional e da seleção adversa. Desse modo, ainda segundo Murcia (2013), o investidor consegue tomar melhores decisões econômicas apoiando-se no rating emitido pelas agências, visto que este será capaz de distinguir os títulos que têm boa qualidade Disponível em: http://editora.unoesc.edu.br/index.php/race dos de pior qualidade, o que, consequentemente, resultaria em uma melhor alocação de recursos no mercado.…”

Section: Introductionunclassified

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Impacto dos Ratings de crédito nas ações de empresas de capital aberto no Brasil

Silveira

Takamatsu

Avelino

2017

Race

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Resumo O rating de crédito expressa uma opinião, por intermédio de escalas, sobre a qualidade do crédito de empresas, utilizado-a como medida de avaliação de risco no mercado. Agências de classificação de risco de crédito, como a Moody’s, divulgam os ratings que atribuem às empresas. Primeiramente, essas agências emitem o new rating, que representa o primeiro rating da companhia, e, posteriormente, essa emissão pode apresentar variações, denominadas upgrades e downgrades, relativas a boas e más notícias, respectivamente. Além disso, os ratings podem ser colocados em uma Watchlist quando, em breve, pode haver uma mudança do rating para downgrade ou para upgrade. O objetivo com este estudo consistiu, diante do que foi tratado, em abordar o impacto do rating de crédito sobre os preços das ações de empresas listadas na bolsa de valores brasileira. Para alcançar o objetivo proposto, foi analisada uma amostra de 44 empresas comercializadas na BM&FBovespa e 65 ratings nacionais de longo prazo emitidos pela Moody’s entre 2000 e 2015. Utilizou-se a metodologia de estudo de eventos, com os retornos normais calculados pelo modelo de retornos ajustados ao risco e ao mercado, e o Teste-F e o Teste-T para verificar a significância dos resultados. As análises finais evidenciaram que os preços das ações não são afetados de forma significativa pelas divulgações dos new ratings, downgrades, upgrades, on watch – possible downgrades e on watch – possible upgrades em nenhuma janela do evento, indicando que os ratings, para a amostra analisada, não trazem novas informações ao mercado.Palavras-chave: Ações. Rating. Estudo de eventos. Retornos anormais. Abstract Credit ratings are used as a mean to investors get new information on the companies by reducing the information asymmetry in the market. Thus, the rating is an important mean of business information with investors, enabling share prices relating to companies react to it. Branches of credit rating as Moody's, disclose the ratings they assign to companies. First, the agency issues the new rating, which represents the company's first rating, then this issue may vary, upgrades and downgrades calls relating to good and bad news respectively. In addition, the ratings could be placed in a Watchlist when, soon there may be a change to the rating downgrade or upgrade. The purpose of this study was to discuss the impact that the credit rating has on stock prices of companies listed on the Brazilian stock exchange. For a sample of 44 companies traded on BM&FBovespa and 65 long-term national ratings issued by Moody's between 2000 and 2015, we used the event study methodology, with normal returns calculated by the model of returns adjusted for risk and market the F-Test and T-Test to test the significance of the results. The final analysis showed that stock prices are not significantly affected by the disclosures of new ratings, downgrades, upgrades, on watch – possible downgrades and on watch – possible upgrades in any event window, indicating that the ratings do not bring new information to the market.Keywords: Stocks. Rating. Event studies. Abnormal returns.

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The impact of credit rating changes in Latin American stock markets

Cited by 23 publications

References 14 publications

View from practice: Stock market reaction to sukuk credit rating changes in Malaysia

View from practice: Stock market reaction to sukuk credit rating changes in Malaysia

Credit Rating Changes and Stock Market Reaction in the Kingdom of Bahrain

Impacto dos Ratings de crédito nas ações de empresas de capital aberto no Brasil

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