Academic Scientific JournalsMarket pricing of European banks’ credit rating changes
Keywords:
credit rating, rates of return, banks, default riskAbstract
The basic goal of the article is to analyse the impact of the changes of banks’ credit ratings on the rates of return of banks’ shares. The following hypotheses have been formulated: first, a downgrade of a credit rating exerts statistically significant negative influence on the rate of return of banks’ shares. Secondly, the impact of the changes of credit ratings is greater in developed countries. The analysis has been conducted for European banks for the period of 1980–2015 using an event study method. The sample has been divided into subsamples according to: the downgrade and upgrade of credit ratings, membership in politico-economic institutions, and the development status of countries, on the basis of the data collected from Thomson Reuters. Dependent variables are taken as daily rates of returns and independent variables are the long-term issuer credit ratings proposed by S&P.
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