Cross-Sectional Variation in Stock Price Reaction to Bond Rating Changes: Evidence from India (Methodology-2)

The BSE 500 companies were then divided into two equal parts -large and small, each year on the basis of their characteristic value. Company below the median characteristic value was classified as small or low on characteristic otherwise it was classified as large or high on the characteristic1. The characteristic category of each case of […]

Tags: , , , ,

  • Digg
  • Del.icio.us
  • StumbleUpon
  • Reddit
  • Twitter
  • RSS
read comments

Cross-Sectional Variation in Stock Price Reaction to Bond Rating Changes: Evidence from India (Methodology-1)

The study has been conducted in two parts. In the first part, the relationship between company characteristics, bond rating changes and stock returns is examined. The impact of bond rating changes is analysed separately in case of downgrades and upgrades and for each of the company characteristics. We use event study methodology, as developed by […]

Tags: , , , ,

  • Digg
  • Del.icio.us
  • StumbleUpon
  • Reddit
  • Twitter
  • RSS
read comments

Cross-Sectional Variation in Stock Price Reaction to Bond Rating Changes: Evidence from India (Data)

The data about the bond rating changes was collected from the websites of the two main rating agencies in India namely – CRISIL and ICRA. A list of all the events where a company’s bonds had been upgraded or downgraded between November 2003 and February 2011 was made. This consisted of a total of 227 […]

Tags: , , , ,

  • Digg
  • Del.icio.us
  • StumbleUpon
  • Reddit
  • Twitter
  • RSS
read comments

Cross-Sectional Variation in Stock Price Reaction to Bond Rating Changes: Evidence from India (Introduction-5)

Although some studies do cover the rating changes, but their impact on security prices is not examined. Only a few studies explore this relationship in the Indian context. Moreover, other important areas such as the effect of firm characteristics on the relationship between bond rating changes and stock return behaviour have not been studied. The […]

Tags: , , , ,

  • Digg
  • Del.icio.us
  • StumbleUpon
  • Reddit
  • Twitter
  • RSS
read comments

Cross-Sectional Variation in Stock Price Reaction to Bond Rating Changes: Evidence from India (Introduction-4)

A related issue is whether the investors react more strongly where the change in bond rating is from investment to speculative grade in case of downgrades. Holthausen and Leftwich (1986); Hite and Warga (1997); Creighton, Gower and Richards (2007); Benjamin (2008) and Lal and Mitra (2011) found that downgrades resulting in change in category of […]

Tags: , , , ,

  • Digg
  • Del.icio.us
  • StumbleUpon
  • Reddit
  • Twitter
  • RSS
read comments

Cross-Sectional Variation in Stock Price Reaction to Bond Rating Changes: Evidence from India (Introduction-3)

Dichev and Piotroski (2001) and Creighton, Gower and Richards (2007) reported stronger price reaction for small firms. Avramov et al. (2009) ran cross-sectional regressions of monthly individual stock returns on credit rating and other firm characteristics including book value to market value ratio but did not find it to significantly affect the returns. Cornell, Landsman […]

Tags: , , , ,

  • Digg
  • Del.icio.us
  • StumbleUpon
  • Reddit
  • Twitter
  • RSS
read comments

Cross-Sectional Variation in Stock Price Reaction to Bond Rating Changes: Evidence from India (Introduction-2)

Hence, a rating downgrade is associated with a decline in stock prices while an upgrade (or placement on a watch with positive indications) is associated with rise in stock prices. Wealth redistribution hypothesis emphasizes that there is usually a conflict between the interest of bondholders and stockholders. The limited liability may prompt the stockholders to […]

Tags: , , , ,

  • Digg
  • Del.icio.us
  • StumbleUpon
  • Reddit
  • Twitter
  • RSS
read comments

Cross-Sectional Variation in Stock Price Reaction to Bond Rating Changes: Evidence from India (Introduction-1)

Credit rating agencies play a very vital role in the financial markets by providing an opinion about the ‘quality’ or ‘creditworthiness’ of a particular debt instrument to the investors. The ratings define the default risk for the bond issue over its life. While the investors gain from this assessment, it is claimed that the firms […]

Tags: , , , ,

  • Digg
  • Del.icio.us
  • StumbleUpon
  • Reddit
  • Twitter
  • RSS
read comments