Journal of Commerce and Management Thought
Year : 2013, Volume : 4, Issue : 4
First page : ( 732) Last page : ( 732)
Print ISSN : 0975-623X. Online ISSN : 0976-478X.

Monitoring Abnormality in Returns Around Credit Rating Announcements

Kapoor Amitesh, Sachdeva Sakshi, Gupta Ashima

Online published on 10 October, 2013.

Summary

A reliable credit rating provides creditworthiness and financial strength to a firm. Any revision to credit rating may provide signal to volatility in returns of that firm. We study the relationship between credit rating and its security return. Banks being the back bone to any economy, bonds rating provides information how many the banks are reliable and credit worthy to the investors. Using event study framework with E-Grach application, results suggest that credit rating does affect the volatility of stocks. And the effect during downgrade in credit rating is more than the effect during upgrade. Also, the banks with higher market share shows more positive returns than the banks with lower market share in case of credit rating upgrade, and vice versa trend follows in case of downgrade. This suggests that credit rating can give some abnormal returns in a specific window.

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