This study examines the stock-market reactions to corporate bond-rating changes, in association with stock prices and investor behavior on trading volumes and trading patterns. Abnormal returns, abnormal volumes, and net order imbalance are estimated, using the transaction data of Korean firms whose bonds have been rated by Korea Investors Service, NICE Investors Service, and Korea Ratings between January 2001 and April 2015. This paper finds positive (negative) abnormal stock returns around upgrades (downgrades), although stock-price reactions to downgrades are statistically more significant than those to upgrades. In addition, significant negative abnormal returns are detected with rating downgrades of two grades or more, and with downgrades that move the firm from investment grade to speculative grade. There is little evidence of significant variation in return reactions to upgrades across differing market conditions; however, downgrades during steady periods result in negative abnormal returns that are statistically significant. Overall, the results for abnormal stock returns suggest that the stock market reacts more sensitively to rating downgrades than to upgrades, consistent with findings from previous studies. Finally, significant abnormal volumes and significant order imbalances are found around rating changes, and the extent to which each investor group (domestic institutions, domestic individuals, and foreign investors) reacts to rating changes varies.