Asymmetric benchmarking in bank credit rating

Shen, Chung‐Hua; Huang, Yu-Li; Hasan, Iftekhar

doi:10.1016/j.intfin.2011.08.004

Cited by 74 publications

(35 citation statements)

References 65 publications

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“…The multivariate analysis aims to control for multiple factors that may affect banks' share prices and volatility, such as the levels of banks' creditworthiness, bank size, book‐to‐market, bank characteristics or country characteristics (e.g. Shen et al , ; Hau et al , ). The following equations are estimated:

C A {normalR}_{i, s} = α_{1} + β_{normal1} \times Δ Ratin {normalg}_{i,t} + \sum_{k = 1}^{normaln} ϕ_{k} \times X_{i, t}^{k} + ϵ_{i, t}

C A {normalR}_{i, s} = α_{1} + β_{normal1} \times Δ Ratin {normalg}_{i,t} + γ_{normal1} \times Δ Ratin {normalg}_{i,t} \times D_{Reg .change} + \sum_{k = 1}^{normaln} ϕ_{k} \times X_{i, t}^{k} + ϵ_{i, t}

B H A {normalR}_{i, s} = α_{1} + β_{normal1} \times Δ Ratin {normalg}_{i,t} + \sum_{k = 1}^{normaln} ϕ_{k} \times X_{i, t}^{k} + ϵ_{i, t}

B H A {normalR}_{i, s} = α_{1} + β_{normal1} \times

…”

Section: Methodsmentioning

confidence: 99%

“…Caporale et al () find that country‐specific factors (in the form of heterogeneous intercepts) affect EU countries' bank ratings. Shen et al () find that larger bank assets and higher sovereign credit ratings boost bank credit ratings. Hau et al () find that bank characteristics significantly affect the quality of ratings assigned to banks in Europe and the United States by the three largest CRAs.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Market Impact under a New Regulatory Regime: Credit Rating Agencies in Europe

et al. 2015

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We investigate whether there are any identifiable differences in market perceptions of rating news released by Moody's, S&P and Fitch following the establishment of a new regulatory regime in July 2011, when the European Securities and Markets Authority assumed responsibility for rating agencies' regulation in Europe. We focus the analysis on the impact of bank rating actions on stock returns and volatility during 2008–2013. Among the intended effects of the new regulatory regime are higher rating quality and enhanced market stability, yet we find very mixed evidence. Many differentials in market responses across CRAs are identified, which mean that a consistent effect of the new regulatory regime is not discernible.

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C A {normalR}_{i, s} = α_{1} + β_{normal1} \times Δ Ratin {normalg}_{i,t} + \sum_{k = 1}^{normaln} ϕ_{k} \times X_{i, t}^{k} + ϵ_{i, t}

C A {normalR}_{i, s} = α_{1} + β_{normal1} \times Δ Ratin {normalg}_{i,t} + γ_{normal1} \times Δ Ratin {normalg}_{i,t} \times D_{Reg .change} + \sum_{k = 1}^{normaln} ϕ_{k} \times X_{i, t}^{k} + ϵ_{i, t}

B H A {normalR}_{i, s} = α_{1} + β_{normal1} \times Δ Ratin {normalg}_{i,t} + \sum_{k = 1}^{normaln} ϕ_{k} \times X_{i, t}^{k} + ϵ_{i, t}

B H A {normalR}_{i, s} = α_{1} + β_{normal1} \times

…”

Section: Methodsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Market Impact under a New Regulatory Regime: Credit Rating Agencies in Europe

et al. 2015

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“…According to the authors, the regulatory change has reduced the negative abnormal returns reported following bank rating downgrades by Fitch prior to July 2011. Shen, Huang, and Hansan (2012) find that larger bank assets and higher sovereign credit ratings affect significantly bank credit ratings. Caporale, Matousek, and Stewart (2011) find that country-specific factors affect EU countries' bank ratings.…”

Section: Rating Change Announcementsmentioning

confidence: 83%

Stock price effects of bank rating announcements: An application to European Union countries

2018

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This paper uses daily stock prices data surrounding credit rating announcement dates to examine abnormal returns of stocks of the European Union banks experiencing debt rating announcements, during the period 2004–2015. The results of the event studies suggest that rating agencies, by issuing downgrades and upgrades, provide relevant information to capital markets. The results also indicate that rating agencies contribute to enhance the transparency and efficiency in capital markets by standardizing information for all investors. The large positive preupgrade returns we observe are consistent with the view that upgrades are of most interest to market investors. There is no significant evidence of abnormal returns on announcements of rating watches.

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“…Studies on the effect of sovereign credit risk on corporate access to debt capital draw on perspectives from different theories and disciplines. Several scholars (e.g., Eichengreen & Mody, ; Ferri & Liu, ; Setty & Dodd, , Shen, Huang, & Hasan, ) refer to the discussion on market efficiency and asymmetric information where sovereign ratings are typically regarded as instruments increasing transparency for investors in developing or emerging markets. Although sovereign ratings (by nature) do not constitute a perfect assessment for the creditworthiness of private corporations in those countries, it can reasonably be assumed that, in the absence of full information transparency, investors resort to these imperfect signals in evaluating local investment opportunities rather than engaging in the (costly) process of gathering more accurate information.…”

Section: Influence Of Sovereign Ratings On Corporate Activitiesmentioning

confidence: 99%

The Impact of Sovereign Credit Ratings on Corporations: A Literature Review and Research Recommendations

Nguyen¹,

Knyphausen‐Aufseß

2014

Financial Market

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During the financial crisis, sovereign ratings have come under increased public scrutiny due to their strong impact on sovereign borrowing costs and hence financial stability of countries. However, their influence on corporations within and outside the respective nations has so far attracted only limited attention, although several academics have provided intriguing insights in this regard. In order to obtain a structured overview of this relatively young strand of research, this paper reviews key insights and conclusions that the extant literature offers on the role of sovereign creditworthiness for corporations. Herein, it focuses on the effects that have been observed for the corporate business environment, access to capital, and foreign investment activities. Different research issues providing fertile ground for future studies are identified.

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Asymmetric benchmarking in bank credit rating

Cited by 74 publications

References 65 publications

Market Impact under a New Regulatory Regime: Credit Rating Agencies in Europe

Market Impact under a New Regulatory Regime: Credit Rating Agencies in Europe

Stock price effects of bank rating announcements: An application to European Union countries

The Impact of Sovereign Credit Ratings on Corporations: A Literature Review and Research Recommendations

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