Reactions of the Nordic Stock Markets to changes in Credit Ratings

Sammanfattning: The relevance of credit ratings has seen augmented growth after the financial crises, especially in the Eurobond market, even though U.S. agencies have been criticised whether ratings are relevant information sources for international capital markets and if non-U.S. market participants relate their investment decision on the ratings. This paper is concentrated on the association between changes in corporate credit ratings and stock returns in the Nordic market. Applying event study methodology, we investigate how strongly the announcement effect on daily stock returns respond to rating announcements by conducting parametric and non-parametric tests. We base our study on a sample of credit rating changes by Standard & Poor’s from year 2001 to 2017, consisting of listed corporates from Denmark, Finland, Norway and Sweden.