The News Content of Bank Rating Changes - Evidence from a Global Event Study

Christian Fieberg (), Armin Varmaz (), Jörg Prokop () and Finn Körner
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Christian Fieberg: University of Bremen - Faculty for Business Study & Economics
Armin Varmaz: University of Applied Sciences Bremen - International Finance & Corporate Finance
Jörg Prokop: University of Oldenburg - Finance and Banking & ZenTra

No 24 / 2013, ZenTra Working Papers in Transnational Studies from ZenTra - Center for Transnational Studies

Abstract: We study the information content of about 3,300 global bank rating changes before and after the Lehman shock in September 2008 from an equity investor's perspective. Based on a multi-model event study approach, we find that while upgrades are not associated with significant abnormal bank stock returns, downgrades have a significantly negative effect. In addition, abnormal returns are more negative post-Lehman, and even when controlling for bank size, this effect is considerably stronger for small banks than for large banks. We conclude that large banks' stock prices seem to be to some extent insulated from negative rating information even post-Lehman due to an implicit "too big to fail" subsidy anticipated by equity investors.

Keywords: credit rating; event study; too big to fail; SIFI; multi-factor approach (search for similar items in EconPapers)
JEL-codes: G14 G15 N2 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2013-12, Revised 2013-12
New Economics Papers: this item is included in nep-ban
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http://papers.ssrn.com/abstract=2375266 First version, 2013 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:zen:wpaper:24

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