Abstract
AbstractThis paper uses daily stock prices data surrounding credit rating announcement dates to examine abnormal returns of stocks of the European Union banks experiencing debt rating announcements, during the period 2004–2015. The results of the event studies suggest that rating agencies, by issuing downgrades and upgrades, provide relevant information to capital markets. The results also indicate that rating agencies contribute to enhance the transparency and efficiency in capital markets by standardizing information for all investors. The large positive preupgrade returns we observe are consistent with the view that upgrades are of most interest to market investors. There is no significant evidence of abnormal returns on announcements of rating watches.
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