The Impact of Sovereign Credit Signals on Bank Share Prices during the European Sovereign Debt Crisis

Gwion Williams (), Rasha Alsakka and Owain ap Gwilym

No 13007, Working Papers from Bangor Business School, Prifysgol Bangor University (Cymru / Wales)

Abstract: The ongoing financial crisis has drawn attention to the role of credit rating agencies (CRAs). We investigate the relative impacts of sovereign actions by different CRAs on the share prices of major European banks during the financial crisis. We examine how bank abnormal returns are affected by sovereign rating changes, watch and outlook announcements, to capture how the crisis spills over across countries and from the sovereign to the financial sector. We find that CRAs’ signals affect share prices, although there is no evidence that CRA actions are the dominant force leading to falling share prices during the crisis.

Keywords: European sovereign debt crisis; Credit signals; Spillover effect; Credit outlook/watch; Bank shares (search for similar items in EconPapers)
JEL-codes: G15 G21 G24 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2013-10
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-eec and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:bng:wpaper:13007

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