Stock Returns and Bank Ratings in the PIIGS

Carlos Muñoz

Chapter 8 in Liquidity Risk, Efficiency and New Bank Business Models, 2016, pp 205-239 from Palgrave Macmillan

Abstract: Abstract This paper analyses the effect of rating signals on banks’ stock market returns in European peripheral countries during the period 2002–2012. The results obtained show that investors do respond to rating announcements, and that before the financial crisis such announcements had the opposite effect to what would be expected according to the financial situation of the entities evaluated due to the investors’ appetite for risk. On the other hand, since the financial crisis investors’ risk aversion has increased, as banks’ rating signals have the expected effect on the stock market return given the financial situation of the entities evaluated. Analysis of the causal relationship between rating signals and financial markets indicates that the rating agencies do not strictly follow a “through-the-cycle” strategy.

Keywords: Financial Market; Rating Agency; Financial Crisis; Abnormal Return; Risk Premium (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-3-319-30819-7_8

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DOI: 10.1007/978-3-319-30819-7_8

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