 Does the impact of credit rating downgrade on bond returns vary by region: Empirical evidence from ChinaJunhui Shan, Guanhua Liu and Lin Zhang Finance Research Letters, 2024, vol. 70, issue C Abstract: Utilizing trading data from corporate and enterprise bonds that experienced credit rating downgrades between 2012 and 2022, this study employs event study methodology and regression analysis to examine the regional differences in the impact of credit rating downgrades on bond pricing and the mechanisms behind these effects. The study found that, during the window period when the bond credit rating is downgraded, there is a significant difference in the cumulative abnormal return of bonds between the eastern and non-eastern regions. Heterogeneity analysis indicates that bonds with higher credit ratings and those issued by non-state-owned enterprises are more significantly affected by credit rating downgrades. This study provides empirical evidence of regional disparities in the impact of credit rating downgrades, and proposes a theoretical mechanism whereby differences in the degree of marketization influence these effects through varying expectations of government implicit guarantees. The findings offer a theoretical foundation for optimizing decision-making by participants in the Chinese bond market. Keywords: Credit rating downgrade; Bond returns; Implicit government guarantee (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:70:y:2024:i:c:s1544612324013941 DOI: 10.1016/j.frl.2024.106365 Access Statistics for this article Finance Research Letters is currently edited by R. Gençay More articles in Finance Research Letters from Elsevier |
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