Authors: Pilar Abad; Antonio Díaz; M. Dolores Robles-Fernández
Addresses: Departamento de Fundamentos del Análisis Económico, Universidad Rey Juan Carlos, Paseo Artilleros s/n, 28032 Madrid, Spain and RFA-IREA. ' Departamento de Análisis Económico y Finanzas, Universidad de Castilla-La Mancha, Plaza de la Universidad 1, 02071 Albacete, Spain. ' Departamento de Fundamentos del Análisis Económico II (Economía Cuantitativa), Universidad Complutense de Madrid, Campus de Somosaguas, 28223 Pozuelo de Alarcón, Madrid, Spain
Abstract: We test whether different rating announcements contain pricing-relevant information and modify trading activity patterns in the Spanish corporate debt markets. We observe a significant widening of yield spreads in short- and long-term corporate debt after reviews of downgrades and negative outlook reports. Additionally, certain rating announcements encourage trading activity even when the information is not pricing-relevant. The release of information arouses investor interest for the involved securities. Thus, trading frequency increases, although larger-sized transactions, which should denote possible portfolio rebalancing, are not observed. In the short-term market, trading volumes are found to fade after reviews for downgrade.
Keywords: CRAs; credit rating agencies; rating changes; event study; yields; liquidity; trading frequency; corporate bond markets; commercial paper market; Spain; corporate debt; trading patterns; trading activity.
International Journal of Monetary Economics and Finance, 2012 Vol.5 No.1, pp.38 - 63
Received: 29 Sep 2010
Accepted: 10 Feb 2011
Published online: 26 Dec 2011 *