Effect of credit rating changes on Australian stock returns
Article first published online: 16 NOV 2006
Accounting & Finance
Volume 46, Issue 5, pages 755–769, December 2006
How to Cite
Choy, E., Gray, S. and Ragunathan, V. (2006), Effect of credit rating changes on Australian stock returns. Accounting & Finance, 46: 755–769. doi: 10.1111/j.1467-629X.2006.00192.x
- Issue published online: 16 NOV 2006
- Article first published online: 16 NOV 2006
- Received 23 May 2005; accepted 20 January 2006 by Robert Faff (Editor).
- Credit ratings;
- Event study
We study the impact credit rating revisions have on stock returns of Australian firms rated by Standard & Poor's and Moody's. Our evidence is consistent with that documented in the USA showing that only downgrades contain price-relevant information. The reaction is most significant when the downgrade: (i) is unanticipated; (ii) is for an unregulated firm; and (iii) reduces the firm's rating by more than one category.