Footnote:
In: Journal of Financial Economics (JFE), Forthcoming
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments September 15, 2014 erstellt
Description:
Rating agencies consult with local government officials several days prior to official announcements of sovereign debt rating changes, making information leakage likely. Using cross-country data from 1988 to 2012, we find evidence of information leakage. In particular, we find statistically and economically significant negative daily abnormal stock index returns prior to downgrade announcements. These effects are more pronounced in countries with lower institutional quality, and persist during times with no downgrade rumors and no concurrent bad news in general. A mild post-announcement reversal consistent with overreaction to pre-event downgrade rumors highlights the adverse effects of such leakage, and thus should be a policy concern for capital market regulators