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The Effect of Ratings Announcements on Firms in Bank-Based Systems

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  • Kiesel, F.
  • Schiereck, D.

Abstract

Rating agencies act as intermediaries for investors in evaluating the creditworthiness of borrowers. The role of ratings agencies is particularly crucial in market-based systems, because, in contrast to long-run bank relationships, outside investors are confronted with greater obstacles to in-depth and reliable evaluations of firm credit risk. The financial intermediation in bank-based systems has implications for the role and the focus of credit rating agencies. This study examines the influence of ratings announcements in Germany, one of the premier bank-based systems. During the study period, from January 2000 through June 2014, we examine 189 Standard & Poor’s and 204 Moody’s ratings announcements. Our results show that ratings announcements are less important in the German market than in market-based systems such as the United States.

Suggested Citation

  • Kiesel, F. & Schiereck, D., 2015. "The Effect of Ratings Announcements on Firms in Bank-Based Systems," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 72729, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    • Handle: RePEc:dar:wpaper:72729
    Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/72729/
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    Cited by:

    1. Abad, Pilar & Ferreras, Rodrigo & Robles, M-Dolores, 2019. "Informational role of rating revisions after reputational events and regulation reforms," International Review of Financial Analysis, Elsevier, vol. 62(C), pages 91-103.
    2. Kiesel, F., 2016. "The effect of credit and rating events on credit default swap and equity markets," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 81247, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    3. Kiesel, Florian, 2016. "The effect of credit and rating events on credit default swap and equity markets," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 81265, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    4. Kiesel, F., 2016. "Do Investors Still Rely on Credit Rating Agencies? Evidence from the Financial Crisis," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 77927, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    5. Britta Hachenberg & Dirk Schiereck, 2018. "Are green bonds priced differently from conventional bonds?," Journal of Asset Management, Palgrave Macmillan, vol. 19(6), pages 371-383, October.

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