Impact of Sovereign Debt Credit Rating Revision on Banking Industry: Evidence from G7 Countries

Reza Tahmoorespour (), Mohamed Ariff () and Alireza Zarei ()
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Reza Tahmoorespour: University Putra Malaysia, Kuala Lumpur, Malaysia
Alireza Zarei: Sunway University Malayia, Kuala Lumpur, Malaysia

Journal of Central Banking Theory and Practice, 2019, vol. 8, issue 2, 85-100

Abstract: The aim of this study is to identify the economic impacts on G7 banking industry when sovereign rating is revised. We used event study methodology (t-statistics) and found that sovereign rating changes significantly affect share market prices. It seems that there is information leakage prior to sovereign rating announcement dates as released by the S&P: there are some negative price effects as well on mixed-type rating change effects, such as ‘rating watch’ announcements. These are new findings that may help to extend the sovereign rating literature in terms of findings from multiple countries, and on sustainability of debt taking.

Keywords: Sovereign Debt; Sovereign Credit Rating; Credit Rating Agency (CRA); Event Study (search for similar items in EconPapers)
JEL-codes: E58 G21 H63 (search for similar items in EconPapers)
Date: 2019
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