The Effect of Sovereign Credit Ratings on Cds Premiums: An Event Study on Developed and Developing Countries

Sinem Uçarkaya, Şenol Babuşcu and Adalet Hazar
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Sinem Uçarkaya: Başkent University
Şenol Babuşcu: Baskent University
Adalet Hazar: Baskent University

Journal of Finance Letters (Maliye ve Finans Yazıları), 2022, vol. 37, issue 117, 135-158

Abstract: This study aims to examine whether credit ratings effect country cds premiums in developed and developing countries and whether the effect differs between the two groups. For this purpose, cds premiums of 26 developed and developing countries for the period of january 2005-october 2021, the announcements of credit rating agencies and event analysis methodwere employed. The results show that cds premiums in developed countries are not statistically affected by negative announcements, but the response to positive announcements is statistically significant. On the other hand, cds premiums in emerging countries are significantly affected by both positive and negative rating announcements.

Keywords: Credit rating announcement; CDS premium; event study; sovereign credit rating (search for similar items in EconPapers)
JEL-codes: C12 G14 G24 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:acc:malfin:v:37:y:2022:i:117:p:135-158

DOI: 10.33203/mfy.1067002

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