The Chinese and The Big Three Credit Rating Agencies – their impact on stock prices

Patrycja Chodnicka – Jaworska () and Piotr Jaworski
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Patrycja Chodnicka – Jaworska: Faculty of Management, University of Warsaw
Piotr Jaworski: Faculty of Management, University of Warsaw

No 22019, Faculty of Management Working Paper Series from University of Warsaw, Faculty of Management

Abstract: The aim of the paper is to analyse the impact of the changes in credit ratings on the stock market, comparing the Chinese and the American Big Three agencies. A literature review has been made and as a result the following three hypotheses have been put. The first one seems as follows: Changes in credit ratings have influence in the case of both upgrades and downgrades of stock prices. The second one is: A stronger reaction of the stock market is observed as an effect of credit rating changes presented by the Chinese and not the American agencies. The third one seems as follows: The impact of credit rating changes is stronger for non-financial institutions and larger companies. Daily observation of the rates of returns on the stock prices and long-term issuer credit ratings proposed by the Chinese and the biggest three rating agencies (S&P’s, Moody’s and Fitch) have been taken for the analysis. Data has been collected from the Thomson Reuters Database from the period between 1990 and 2016. Event study methods have been used to verify the mentioned hypotheses.

Keywords: stock prices; abnormal rates of return; credit rating (search for similar items in EconPapers)
JEL-codes: G14 G15 G21 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2019-02
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