Abstract:
Credit rating agencies make multiple announcements, some of which are intended to reflect the latest information available about a firm and others of which are intended to provide a stable signal of credit quality. Using data on CDS spreads, we examine which of these different types of rating announcements contains pricingrelevant information. We find that all types, including changes in outlook, have a significant impact on CDS spreads. Even rating announcements preceded by similar announcements have an impact. The price impact is greatest for firms with split ratings, smallcap firms and firms rated near the threshold of investment grade.
The views expressed in this publication are those of the authors and do not necessarily reflect the views of the BIS or its member central banks.
