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When did the stock market start to react less to downgrades by Moody’s, S&P and Fitch?

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  • Ginevra Marandola

    (University of Rome Tor Vergata
    University of Rome Tor Vergata)

  • Rossella Mossucca

    (University of Rome Tor Vergata)

Abstract

This paper studies the stock market response to corporate downgrades by S&P, Moody’s and Fitch between 1999 and 2011. The empirical evidence shows that cumulative abnormal returns around downgrades become significantly smaller (in absolute value) after the release in 2003 of the Securities and Exchange Commission’s Report on credit rating agencies. The Report addresses concerns related to the agencies and marks a turning point in the attitude of US regulators towards a more critical approach. This has a strong impact on investors that respond by reacting less to downgrades.

Suggested Citation

  • Ginevra Marandola & Rossella Mossucca, 2021. "When did the stock market start to react less to downgrades by Moody’s, S&P and Fitch?," SN Business & Economics, Springer, vol. 1(2), pages 1-45, February.
    • Handle: RePEc:spr:snbeco:v:1:y:2021:i:2:d:10.1007_s43546-021-00045-w
    DOI: 10.1007/s43546-021-00045-w
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    More about this item

    Keywords

    Credit rating agencies; Credit ratings; Stock market information; Event study;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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