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Are there contagion or competition effects for non rated firms?The case of successive bond rating downgrades of Alcatel

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Author Info
Maxime Merli (Université Louis Pasteur - Strasbourg 3)
Alain Schatt () (Université Robert Schuman - Strasbourg 1)

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Abstract

The object of this paper is to study the impact of successive changes in ratings of the leading firm on non rated firms belonging to the same stock index sector. Two courses of research are being mobilized regarding, on the one hand, the incidence of downgrading of ratings on the value of the firms and on the other hand, the contagion effects associated with the report of bad news. The analysis of the successive downgrading of the ratings of Alcatel, world leader in the telecommunications infrastructure, allows us to point out minor contagion effects among non rated French firms belonging to the same stock index sector.

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File URL: http://www.u-bourgogne.fr/LEG/WP/1070603.pdf
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Publisher Info
Paper provided by Université de Bourgogne - Latec/Fargo (Research center in Finance,organizational ARchitecture and GOvernance) in its series Working Papers FARGO with number 1070603.

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Length: 29 pages
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:dij:wpfarg:1070603

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Postal: 2 Bd Gabriel, BP 26611, 21066 Dijon Cedex, France
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Postal: Gérard Charreaux, Fargo-Latec, Université de Bourgogne 2 Bd Gabriel, BP 26611, 21066 Dijon Cedex, France

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Related research
Keywords: ratings; contagion effects; information transfer; event studies.;

Find related papers by JEL classification:
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G30 - Financial Economics - - Corporate Finance and Governance - - - General

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Fields, Joseph A & Klein, Linda S & Myskowski, Edward G, 1998. "Lloyd's Financial Distress and Contagion within the US Property and Liability Insurance Industry," Journal of Risk and Uncertainty, Springer, vol. 16(2), pages 173-85, May-June. [Downloadable!] (restricted)
  2. Doron Kliger & Oded Sarig, 2000. "The Information Value of Bond Ratings," Journal of Finance, American Finance Association, vol. 55(6), pages 2879-2902, December. [Downloadable!] (restricted)
    Other versions:
  3. Fenn, George W. & Cole, Rebel A., 1994. "Announcements of asset-quality problems and contagion effects in the life insurance industry," Journal of Financial Economics, Elsevier, vol. 35(2), pages 181-198, April. [Downloadable!] (restricted)
  4. M.J. Barron & A.D. Clare & S.H. Thomas, 1997. "The Effect of Bond Rating Changes and New Ratings on UK Stock Returns," Journal of Business Finance & Accounting, Blackwell Publishing, vol. 24(3), pages 497-509. [Downloadable!] (restricted)
  5. H. Kent Baker & Sattar A. Mansi, 2002. "Assessing Credit Rating Agencies by Bond Issuers and Institutional Investors," Journal of Business Finance & Accounting, Blackwell Publishing, vol. 29(9&10), pages 1367-1398. [Downloadable!] (restricted)
  6. Ederington, Louis H. & Goh, Jeremy C., 1998. "Bond Rating Agencies and Stock Analysts: Who Knows What When?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(04), pages 569-585, December. [Downloadable!]
  7. Longstaff, Francis A & Schwartz, Eduardo S, 1995. " A Simple Approach to Valuing Risky Fixed and Floating Rate Debt," Journal of Finance, American Finance Association, vol. 50(3), pages 789-819, July. [Downloadable!] (restricted)
  8. Caton, Gary L & Goh, Jeremy, 2003. " Are All Rivals Affected Equally by Bond Rating Downgrades?," Review of Quantitative Finance and Accounting, Springer, vol. 20(1), pages 49-62, January. [Downloadable!] (restricted)
  9. Hand, John R M & Holthausen, Robert W & Leftwich, Richard W, 1992. " The Effect of Bond Rating Agency Announcements on Bond and Stock Prices," Journal of Finance, American Finance Association, vol. 47(2), pages 733-52, June. [Downloadable!] (restricted)
  10. Richard Cantor & Frank Packer & Kevin Cole, 1997. "Split ratings and the pricing of credit risk," Research Paper 9711, Federal Reserve Bank of New York. [Downloadable!]
  11. Akhigbe, Aigbe & Madura, Jeff, 2001. "Why do contagion effects vary among bank failures?," Journal of Banking & Finance, Elsevier, vol. 25(4), pages 657-680, April. [Downloadable!] (restricted)
  12. Gregory R. Duffee, 1998. "The Relation Between Treasury Yields and Corporate Bond Yield Spreads," Journal of Finance, American Finance Association, vol. 53(6), pages 2225-2241, December. [Downloadable!] (restricted)
  13. Aharony, Joseph & Swary, Itzhak, 1996. "Additional evidence on the information-based contagion effects of bank failures," Journal of Banking & Finance, Elsevier, vol. 20(1), pages 57-69, January. [Downloadable!] (restricted)
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