On the Impact of Bond's Rating Changes on the Firm's Stock Price

Gil Cohen

International Journal of Financial Research, 2014, vol. 5, issue 1, 64-70

Abstract: In the following research I have studied how bond rating changes that was conducted by Israel leading rating agency is affecting the firm's stocks abnormal returns. In order to do so I have examined 9 bonds upgrades and 9 downgrades from December 2012 until October 2013. For each of the stocks I have calculated three times abnormal return 30 days before and 60 days after the event. Results show that bond's rating downgrades has a more significant effect on the socks abnormal return than upgrades. This is especially true for bonds that were downgraded from Lower-medium grade to Non- Investment grade. Moreover, the downgrade effect on the stock price is diminishing after 45 days.

Keywords: bonds rating; abnormal return; rating agencies; yields (search for similar items in EconPapers)
Date: 2014
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