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

Abstract

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.

Have European banks maintained their payout policy during the crisis? The role of scrip dividends

“…Thus, our sample can be considered as sufficiently representative of the European bank landscape. The combination of cross‐section and time series data gives a final sample of 395 observations, a sample size comparable to other studies on the banking sector (Almaqtari, Al‐Homaidi, Tabash, & Farhan, 2019; Anderson, Ruiz‐Ortega, & Tressel, 2017; Echevarria‐Icaza & Sosvilla‐Rivero, 2018; Kusi & Opoku‐Mensah, 2018; Loaba & Zahonogo, 2019; Lobão, Pacheco, & Campos, 2019; Ofori‐Sasu, Mensah, Akuma, & Doku, 2019; Salih, Ghecham, & Al‐Barghouthi, 2019). Data regarding the balance sheet and market prices were obtained from the Thomson Reuters Eikon database.…”