TY - JOUR

T1 - Differences of opinion in sovereign credit signals during the European crisis

AU - Alsakka, R.

AU - ap Gwilym, O.M.

AU - Vu, Huong

N1 - 2016 Taylor & Francis. This is the author accepted manuscript. The final version is available from Taylor & Francis via the DOI in this record.

PY - 2017

Y1 - 2017

N2 - Motivated by the European debt crisis and the new European Union regulatory regime for the credit rating industry, we analyse differences of opinion in sovereign credit signals and their influence on European stock markets. Rating disagreements have a significant connection with subsequent negative credit actions by each agency. However, links among Moody’s/Fitch actions and their rating disagreements with other agencies have weakened in the post-regulation period. We also find that only S&P’s negative credit signals affect the own-country stock market and spill over to other European markets, but this is concentrated in the pre-regulation period. Stronger stock market reactions occur when S&P has already assigned a lower rating than Moody’s/Fitch prior to taking a further negative action.

AB - Motivated by the European debt crisis and the new European Union regulatory regime for the credit rating industry, we analyse differences of opinion in sovereign credit signals and their influence on European stock markets. Rating disagreements have a significant connection with subsequent negative credit actions by each agency. However, links among Moody’s/Fitch actions and their rating disagreements with other agencies have weakened in the post-regulation period. We also find that only S&P’s negative credit signals affect the own-country stock market and spill over to other European markets, but this is concentrated in the pre-regulation period. Stronger stock market reactions occur when S&P has already assigned a lower rating than Moody’s/Fitch prior to taking a further negative action.

U2 - 10.1080/1351847X.2016.1177565

DO - 10.1080/1351847X.2016.1177565

M3 - Article

VL - 23

SP - 859

EP - 884

JO - European Journal of Finance

JF - European Journal of Finance

SN - 1351-847X

ER -