The impact of credit rating announcements on credit default swap spreads

Finnerty, John D.; Miller, Cameron; Chen, Ren Raw

doi:10.1016/j.jbankfin.2013.01.028

Cited by 106 publications

(67 citation statements)

References 29 publications

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“…The CDS spread reactions around the announcement of rating actions are assessed through an event study method similar to Hull, Predescu, and White (2004); Galil and Soffer (2011);and Finnerty, Miller, and Chen (2013). Wealth effects of CDS spread changes for each event are captured by abnormal spread changes (ASCs):…”

Section: Dependent Variablesmentioning

confidence: 99%

ESG in credit ratings and the impact on financial markets

Kiesel

Lücke

2019

Financial Market

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This study examines environment, social, governance (ESG) consideration in rating reports published by credit rating agencies. 3,719 Moody's credit rating reports between 2004 and 2015 are examined and the ESG consideration is analyzed using a latent dirichlet allocation (LDA) approach. We further analyze the stock returns and credit default swap (CDS) spread changes to check whether ESG consideration has an effect on the capital market reactions. We find a small but present consideration of ESG in rating decisions. Within ESG, corporate governance plays the most important role. Moreover, the results reveal that ESG consideration is a significant determinant in the stock return and CDS spread around the rating announcement. We find that all ESG criteria are important for equity and debt investors.

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Section: Dependent Variablesmentioning

confidence: 99%

ESG in credit ratings and the impact on financial markets

Kiesel

Lücke

2019

Financial Market

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“…Finnerty, Miller, and Chen (2013) also find evidence that CDS market can anticipate the announcements on the credit rating changes. On the other hand, Norden and Weber (2004) and Micu, Remolona, and Wooldridge (2006) conclude that all types of rating announcements have a significant impact on CDS spreads.…”

Section: Introductionmentioning

confidence: 80%

CDS Implied Rating Curves

2016

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“…Hull et al (2004), Norden and Weber (2004), Galil and Soffer (2011) and Finnerty et al (2013) amongst others, conclude that international sovereign and/or corporate CDS markets anticipate credit rating events, particularly for downgrades.…”

Section: Literature Reviewmentioning

confidence: 99%

How credit ratings affect sovereign credit risk: Cross-border evidence in Latin American emerging markets

Ballester

González‐Urteaga

2017

Emerging Markets Review

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This article builds upon previous literature by providing a better understanding of how contagion changes in bordering sovereign CDS emerging markets resulting from credit events. To that end, we follow the GVAR methodology using data from Latin American countries. Our findings show evidence for the existence of significant and asymmetric cross-border effects. In particular, a competition effect is observed before the event occurs, indicating that non-event countries suffer (benefit) from upgrades (downgrades) in Brazil, Mexico and Chile (in Argentina and Brazil). In contrast, an imitation effect is observed after rating upgrades in Chile, to the benefit of bordering nonevent countries.-We analyse contagion changes in CDS emerging markets resulting from credit events.-We use GVAR model for Latin American emerging countries from 2004 to 2014.-Evidence for the existence of significant and asymmetric cross-border effects.-A competition effect before the event occurs. Non-event countries suffer (benefit) from upgrades (downgrades).-An imitation effect after rating upgrades, to the benefit of bordering non-event countries. Highlights (for review) AbstractThis article builds upon previous literature by providing a better understanding of how contagion changes in bordering sovereign CDS emerging markets resulting from credit rating events. To that end, we follow the novel GVAR methodology using data from six Latin American emerging countries during an extensive sample period from 2004 to 2014. Our findings show evidence for the existence of significant and asymmetric crossborder effects. In particular, a competition effect is observed before the event occurs, indicating that non-event countries suffer (benefit) from upgrades (downgrades) in Brazil, Mexico and Chile (in Argentina and Brazil). In contrast, an imitation effect is observed after rating upgrades in Chile, to the benefit of bordering non-event countries.

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The impact of credit rating announcements on credit default swap spreads

Cited by 106 publications

References 29 publications

ESG in credit ratings and the impact on financial markets

ESG in credit ratings and the impact on financial markets

CDS Implied Rating Curves

How credit ratings affect sovereign credit risk: Cross-border evidence in Latin American emerging markets

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