| dc.description.abstract | This thesis investigates the effect of credit rating change announcements on stock returns.
Most of the previous literature on the topic studies the effect in the US market, as well
as including a broad-based sample with regards to industries. This thesis adds to the
existing literature by researching the stock effect on European insurance companies. The
insurance industry was specifically chosen due to its presumed higher sensitivity to rating
changes. The event study methodology, as described by MacKinlay (1997), was used to
investigate the topic. Rating change announcements from S&P, Moody's, and Fitch are
analysed from 2009 to 2021.
The general findings from the study are that rating downgrades lead to a significantly
negative stock price reaction, while upgrades lead to a less significant positive reaction.
The results also indicate that the impact of rating announcements varies somewhat,
depending on the rating agency giving the rating. Rating downgrades from S&P seem
to yield a significantly stronger reaction than the two other rating agencies. In addition
to this, the results suggest that rating downgrades over multiple levels cause a stronger
market reaction than rating changes over one level. Furthermore, rating upgrades moving
a credit rating from speculative grade to investment grade show a significantly stronger
market reaction. | en_US |
