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The News Content of Bank Rating Changes - Evidence from a Global Event Study

Author

Listed:
  • Christian Fieberg

    (University of Bremen - Faculty for Business Study & Economics)

  • Armin Varmaz

    (University of Applied Sciences Bremen - International Finance & Corporate Finance)

  • Jörg Prokop

    (University of Oldenburg - Finance and Banking & ZenTra)

  • Finn Marten Körner

    (University of Oldenburg & ZenTra)

Abstract

We study the information content of about 3,300 global bank rating changes before and after the Lehman shock in September 2008 from an equity investor's perspective. Based on a multi-model event study approach, we find that while upgrades are not associated with significant abnormal bank stock returns, downgrades have a significantly negative effect. In addition, abnormal returns are more negative post-Lehman, and even when controlling for bank size, this effect is considerably stronger for small banks than for large banks. We conclude that large banks' stock prices seem to be to some extent insulated from negative rating information even post-Lehman due to an implicit "too big to fail" subsidy anticipated by equity investors.

Suggested Citation

  • Christian Fieberg & Armin Varmaz & Jörg Prokop & Finn Marten Körner, 2013. "The News Content of Bank Rating Changes - Evidence from a Global Event Study," ZenTra Working Papers in Transnational Studies 24 / 2013, ZenTra - Center for Transnational Studies, revised Dec 2013.
    • Handle: RePEc:zen:wpaper:24
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    File URL: http://papers.ssrn.com/abstract=2375266
    File Function: First version, 2013
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    More about this item

    Keywords

    credit rating; event study; too big to fail; SIFI; multi-factor approach;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • N2 - Economic History - - Financial Markets and Institutions

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