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Impact of Sovereign Debt Credit Rating Revision on Banking Industry: Evidence from G7 Countries

Author

Listed:
  • Reza Tahmoorespour

    (University Putra Malaysia, Kuala Lumpur, Malaysia)

  • Mohamed Ariff

    (Sunway University Malayia, Kuala Lumpur, Malaysia)

  • Alireza Zarei

    (Sunway University Malayia, Kuala Lumpur, Malaysia)

Abstract

The aim of this study is to identify the economic impacts on G7 banking industry when sovereign rating is revised. We used event study methodology (t-statistics) and found that sovereign rating changes significantly affect share market prices. It seems that there is information leakage prior to sovereign rating announcement dates as released by the S&P: there are some negative price effects as well on mixed-type rating change effects, such as ‘rating watch’ announcements. These are new findings that may help to extend the sovereign rating literature in terms of findings from multiple countries, and on sustainability of debt taking.

Suggested Citation

  • Reza Tahmoorespour & Mohamed Ariff & Alireza Zarei, 2019. "Impact of Sovereign Debt Credit Rating Revision on Banking Industry: Evidence from G7 Countries," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 8(2), pages 85-100.
    • Handle: RePEc:cbk:journl:v:8:y:2019:i:2:p:85-100
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    File URL: http://www.cbcg.me/repec/cbk/journl/vol8no2-5.pdf
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    Citations

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    Cited by:

    1. Vojtěch Siuda & Milan Szabo, 2021. "Measuring Sovereign Credit Risk of the EU countries," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 10(3), pages 169-192.

    More about this item

    Keywords

    Sovereign Debt; Sovereign Credit Rating; Credit Rating Agency (CRA); Event Study;
    All these keywords.

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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