HOW DO RATING AGENCIES’ DECISIONS IMPACT STOCK MARKETS? A META‐ANALYSIS

The purpose of this study is to examine how credit rating agencies’ decisions impact the stock market using a systematic and quantitative review of existing empirical studies. Specifically, we employ a meta‐regression analysis (MRA) to investigate the extent and nature of the effect of rating agenci...

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Bibliographic Details
Published inJournal of economic surveys Vol. 33; no. 4; pp. 1173 - 1198
Main Authors Hubler, Jérôme, Louargant, Christine, Laroche, Patrice, Ory, Jean‐Noёl
Format Journal Article
LanguageEnglish
Published Oxford Blackwell Publishing Ltd 01.09.2019
Wiley
Subjects
Bias
Credit ratings
Economics and Finance
Event study
Humanities and Social Sciences
Meta-analysis
Rating agencies’ decisions
Rating services
Securities markets
Stock exchanges
Stock returns
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Summary:The purpose of this study is to examine how credit rating agencies’ decisions impact the stock market using a systematic and quantitative review of existing empirical studies. Specifically, we employ a meta‐regression analysis (MRA) to investigate the extent and nature of the effect of rating agencies’ decisions on the stock market. We survey 62 studies published between 1978 and 2015. Our first finding is that the cumulative average abnormal returns calculated from this empirical literature are affected by publication bias. After controlling for publication bias, the main findings of our meta‐analysis indicate that negative rating decisions cause statistically significant negative abnormal returns. This evidence suggests an informational effect. Our results also indicate that positive rating decisions do not have a significant effect. Finally, the MRA results reveal the importance of several factors related to primary study design, as well as to the nature of the data.
ISSN:0950-0804
1467-6419
DOI:10.1111/joes.12317