TY - JOUR
T1 - Differences of opinion in sovereign credit signals during the European crisis
AU - Alsakka, Rasha
AU - ap Gwilym, Owain
AU - Vu, Huong
PY - 2017/8/9
Y1 - 2017/8/9
N2 - Motivated by the European debt crisis and the new European Union regulatory regime for the credit rating industry, we analyse differences of opinion in sovereign credit signals and their influence on European stock markets. Rating disagreements have a significant connection with subsequent negative credit actions by each agency. However, links among Moody’s/Fitch actions and their rating disagreements with other agencies have weakened in the post-regulation period. We also find that only S&P’s negative credit signals affect the own-country stock market and spill over to other European markets, but this is concentrated in the pre-regulation period. Stronger stock market reactions occur when S&P has already assigned a lower rating than Moody’s/Fitch prior to taking a further negative action.
AB - Motivated by the European debt crisis and the new European Union regulatory regime for the credit rating industry, we analyse differences of opinion in sovereign credit signals and their influence on European stock markets. Rating disagreements have a significant connection with subsequent negative credit actions by each agency. However, links among Moody’s/Fitch actions and their rating disagreements with other agencies have weakened in the post-regulation period. We also find that only S&P’s negative credit signals affect the own-country stock market and spill over to other European markets, but this is concentrated in the pre-regulation period. Stronger stock market reactions occur when S&P has already assigned a lower rating than Moody’s/Fitch prior to taking a further negative action.
KW - EU regulation of rating agencies
KW - European debt crisis
KW - sovereign credit signals
KW - split rating
KW - stock return
UR - http://www.scopus.com/inward/record.url?scp=84965050228&partnerID=8YFLogxK
UR - http://curve.coventry.ac.uk/open/items/f4ccc7b6-b91a-43e6-aea5-4443acfbfd51/1/
U2 - 10.1080/1351847X.2016.1177565
DO - 10.1080/1351847X.2016.1177565
M3 - Article
AN - SCOPUS:84965050228
SN - 1351-847X
VL - 23
SP - 859
EP - 884
JO - European Journal of Finance
JF - European Journal of Finance
IS - 10
ER -