scholarly journals Are rating agencies still credible after the subprime crisis?

2017 ◽  
Vol 14 (2) ◽  
pp. 82-87
Author(s):  
Eleonora Isaia ◽  
Marina Damilano
Keyword(s):  
Financial Crisis ◽  
Stock Price ◽  
Credit Rating ◽  
Conflicts Of Interest ◽  
Strong Support ◽  
Subprime Crisis ◽  
Multivariate Tests ◽  
Rating Agencies ◽  
Price Reaction ◽  
Stock Price Reaction

Reputational concerns should discipline credit rating agencies (CRAs), eliminate any conflicts of interest, and motivate them to provide unbiased ratings. However, the recent financial crisis confirms models of CRAs’ behavior that predict inflated ratings for complex products and during booms. We test whether CRAs suffered a reputational damage for this behavior. We find strong support in the data for our hypothesis. The stock price reaction to rating revisions is significantly lower after the financial crisis, particularly in the financial sector. In multivariate tests, we find that the stock price reaction is lower, on average, in the post-crisis period by 2.3%.

Has the Global Financial Crisis Changed the Market Response to Credit Ratings? Evidence from an Emerging Market

2019 ◽  
Vol 19 (1) ◽  
pp. 7-32
Author(s):  
Kaveri Krishnan ◽  
Sankarshan Basu ◽  
Ashok Thampy
Keyword(s):  
Financial Crisis ◽  
Stock Price ◽  
Credit Rating ◽  
Global Financial Crisis ◽  
Emerging Market ◽  
Abnormal Returns ◽  
Market Response ◽  
Stock Price Reaction ◽  
The Difference ◽  
The Global Financial Crisis

This article analyses the differential market response to credit rating revisions in the pre- and post-global financial crisis (GFC) period using data from India. By reviewing the stock price reaction to the announcement of long-term rating changes during the period 1996–2015, the study finds evidence that the stock price reacted less to rating announcements after the GFC of 2008. However, the difference in the cumulative abnormal returns before the GFC and after the GFC is not statistically significant. JEL codes: G240, G010, G140

scholarly journals Moody’s Ratings Statistical Forecasting for Industrial and Retail Firms

Economies ◽  
2021 ◽  
Vol 9 (4) ◽  
pp. 154
Author(s):  
Lorena Caridad y López del Río ◽  
María de los Baños García-Moreno García ◽  
José Rafael Caro-Barrera ◽  
Manuel Adolfo Pérez-Priego ◽  
Daniel Caridad y López del Río
Keyword(s):  
Artificial Intelligence ◽  
Financial Crisis ◽  
Credit Rating ◽  
Conflicts Of Interest ◽  
Rating Agencies ◽  
Public Data ◽  
Rating Process ◽  
Rating Model ◽  
External Check

Long-term ratings of companies are obtained from public data plus some additional nondisclosed information. A model based on data from firms’ public accounts is proposed to directly obtain these ratings, showing fairly close similitude with published results from Credit Rating Agencies. The rating models used to assess the creditworthiness of a firm may involve some possible conflicts of interest, as companies pay for most of the rating process and are, thus, clients of the rating firms. Such loss of faith among investors and criticism toward the rating agencies were especially severe during the financial crisis in 2008. To overcome this issue, several alternatives are addressed; in particular, the focus is on elaborating a rating model for Moody’s long-term companies’ ratings for industrial and retailing firms that could be useful as an external check of published rates. Statistical and artificial intelligence methods are used to obtain direct prediction of awarded rates in these sectors, without aggregating adjacent classes, which is usual in previous literature. This approach achieves an easy-to-replicate methodology for real rating forecasts based only on public available data, without incurring the costs associated with the rating process, while achieving a higher accuracy. With additional sampling information, these models can be extended to other sectors.

Stock price reaction to cash dividend announcements in Vietnam

2017 ◽  
Vol 24 (2) ◽  
pp. 74-89
Author(s):  
NGUYEN THI VAN ANH ◽  
NGUYEN XUAN TRUONG ◽  
DAO MAI HUONG
Keyword(s):  
Stock Price ◽  
Cash Dividend ◽  
Price Reaction ◽  
Dividend Announcements ◽  
Stock Price Reaction

The Stock Price Reaction to Repricing Employee Stock Options

2001 ◽  
Author(s):  
John R.M. Hand ◽  
Barbara M. Grein ◽  
Kenneth J. Klassen
Keyword(s):  
Stock Price ◽  
Stock Options ◽  
Employee Stock Options ◽  
Price Reaction ◽  
Stock Price Reaction

Stock Price Reaction to Debt Offerings: The Turkish Evidence

2020 ◽  
Author(s):  
Evrim Akdogu ◽  
Sureyya Avci ◽  
Serif Aziz Simsir
Keyword(s):  
Stock Price ◽  
Price Reaction ◽  
Stock Price Reaction
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