The Effect of a Sovereign Credit Rating Change on Share Prices of the South African Retail Banks

M. C. Wet () and Ilse Botha
Additional contact information
M. C. Wet: University of Johannesburg

Chapter Chapter 21 in Advances in Time Series Data Methods in Applied Economic Research, 2018, pp 303-324 from Springer

Abstract: Abstract The increasing role of credit rating agencies in emerging markets and the various impacts that these rating agencies have on emerging market economies have become of great interest in modern finance. Recent empirical evidence suggests that credit rating downgrades have the potential to disrupt economies. To minimise and control such disruption, it is essential to establish what exactly these disruptions entitles. This study aims to determine whether a South African sovereign credit rating downgrade caused abnormal returns in the shares of local retail banks. Furthermore, the study sets out to determine whether A South African sovereign credit rating downgrade resulted in significant volatility spillover on the shares of South African retail banks. An event study analysis will be implemented to determine whether a downgrade caused abnormal returns, and the presence of volatility spillovers will be determined by means of a GARCH-BEKK model. The main findings indicates that a South African sovereign credit downgrade did result in negative cumulated abnormal returns, and that a change in the South African sovereign credit rating did cause volatility in the shares of South African retail banks. These share price effects can have various implications, such as spillovers to other parts of the equity market, as well as negative spillovers to the real economy. In order to mitigate the potential implications of a South African sovereign credit rating change through the South African retail banking sector, the effects of such a change must first be determined, making this an important study to conduct.

Date: 2018
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:spr:prbchp:978-3-030-02194-8_21

Ordering information: This item can be ordered from
http://www.springer.com/9783030021948

DOI: 10.1007/978-3-030-02194-8_21

Access Statistics for this chapter

More chapters in Springer Proceedings in Business and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().