Rating timing differences between the two leading agencies: Standard and Poor's and Moody's

Abstract

This study examines the impacts of rating change timing differences between the two leading agencies, namely, Standard and Poor's and Moody's with particular focus on the stock market impact of Standard and Poor's Foreign Currency rating changes and Moody's Bonds and Notes rating changes. The analysis focuses on whether there is a rating change pattern between these agencies and undertakes a comparison of the impact of rating changes on the markets between single rating changes and joint rating changes. The paper equally determines whether rating changes induce different reactions depending on the level of rating. The findings indicate that in contrast to the results obtained in previous literature, rating change announcements do not impart additional information to the market. An interesting finding is that joint downgrades seem to impact on the market only in-between the announcement dates for the two agencies. In addition, the reason of the rating change needs to be taken into consideration to assess the stock market reaction to rating changes.