The effect of credit rating announcements on stock returns of banks in India

Silky Vigg Kushwah and C.A. Manav Vigg

Afro-Asian Journal of Finance and Accounting, 2023, vol. 13, issue 1, 41-53

Abstract: This study investigates the impact of credit rating changes on the stock returns of the commercial banks of India. The study reports that the bank returns are significantly negative during the pre-downgrade announcement period. Interestingly, the returns are negative again on the downgrade announcement day. Conversely, the bank returns turn insignificantly positive during the post downgrade announcement period. The study concludes that downgrades do not have a negative wealth impact on banks' stock returns after the announcement by credit rating agencies. Eventually, it results in early awareness of investors regarding the financial position of the banks, and it does not come as a shock to them. The study has a direct implication on short-term investors who rely highly on the announcements by rating agencies to make buy/sell decisions. Moreover, the study will also help the regulators and banks better understand the impact of such rating changes on stock returns.

Keywords: event study; market efficiency; average abnormal return; AAR; cumulative abnormal return; CAR; banks; credit rating; India. (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.inderscience.com/link.php?id=128619 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ids:afasfa:v:13:y:2023:i:1:p:41-53

Access Statistics for this article

More articles in Afro-Asian Journal of Finance and Accounting from Inderscience Enterprises Ltd
Bibliographic data for series maintained by Sarah Parker ().