Bank Rating Changes and Bank Stock Returns—Puzzling Evidence from the Emerging Markets

November 1, 1999

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Format: Chicago

Anthony J. Richards, and David Deddouche. Bank Rating Changes and Bank Stock Returns—Puzzling Evidence from the Emerging Markets, (USA: International Monetary Fund, 1999) accessed September 19, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines the performance of emerging market bank stocks around the time of rating changes by major international agencies. The data suggest that downgrades on average have followed periods of negative cumulative abnormal returns for banks, although upgrades have not followed periods of positive returns. More important, stock prices either do not respond to rating changes or respond in the opposite direction to what would be expected if announcements conveyed value-relevant information. The paper concludes that there are limits to the extent that supervisors in emerging markets can rely on market participants to monitor the safety and soundness of banks.

Subject: Asset prices, Banking, Bond ratings, Emerging and frontier financial markets, Financial institutions, Financial markets, Prices, Stock markets, Stocks

Keywords: Abnormal return, Announcement-window return, Asia and Pacific, Asset prices, Bank return data, Bank Stock Prices, Bond ratings, Emerging and frontier financial markets, Event Study, Market return, Rating Changes, Ratings change, Return measure, Stock markets, Stock return data, Stocks, WP

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1999/151
Stock No:

WPIEA1511999
ISBN:

9781451857016
ISSN:

1018-5941

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