Impact of Sovereign Debt Credit Rating Revision on Banking Industry: Evidence from G7 Countries

Reza Tahmoorespour, Mohamed Ariff, Alireza Zarei

Research output: Contribution to journalArticle

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Abstract

The aim of this study is to identify the economic impacts on G7 banking industry when sovereign rating is revised. We used event study methodology (t-statistics) and found that sovereign rating changes significantly affect share market prices. It seems that there is information leakage prior to sovereign rating announcement dates as released by the S&P: there are some negative price effects as well on mixed-type rating change effects, such as 'rating watch' announcements. These are new findings that may help to extend the sovereign rating literature in terms of findings from multiple countries, and on sustainability of debt taking.

Original languageEnglish
Pages (from-to)85-100
Number of pages16
JournalJournal of Central Banking Theory and Practice
Volume8
Issue number2
Early online date22 May 2019
DOIs
Publication statusPublished - May 2019
Externally publishedYes

Bibliographical note

Open access

Keywords

  • Credit Rating Agency (CRA)
  • Event Study
  • Sovereign Credit Rating
  • Sovereign Debt

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Strategy and Management

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