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HOW DO RATING AGENCIES’ DECISIONS IMPACT STOCK MARKETS? A META‐ANALYSIS
Author(s) -
Hubler Jérôme,
Louargant Christine,
Laroche Patrice,
Ory JeanNoёl
Publication year - 2019
Publication title -
journal of economic surveys
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.657
H-Index - 92
eISSN - 1467-6419
pISSN - 0950-0804
DOI - 10.1111/joes.12317
Subject(s) - meta analysis , publication bias , credit rating , economics , meta regression , stock (firearms) , stock market , econometrics , event study , empirical research , regression analysis , rating scale , actuarial science , financial economics , psychology , statistics , medicine , mechanical engineering , paleontology , developmental psychology , context (archaeology) , mathematics , horse , engineering , biology
The purpose of this study is to examine how credit rating agencies’ decisions impact the stock market using a systematic and quantitative review of existing empirical studies. Specifically, we employ a meta‐regression analysis (MRA) to investigate the extent and nature of the effect of rating agencies’ decisions on the stock market. We survey 62 studies published between 1978 and 2015. Our first finding is that the cumulative average abnormal returns calculated from this empirical literature are affected by publication bias. After controlling for publication bias, the main findings of our meta‐analysis indicate that negative rating decisions cause statistically significant negative abnormal returns. This evidence suggests an informational effect. Our results also indicate that positive rating decisions do not have a significant effect. Finally, the MRA results reveal the importance of several factors related to primary study design, as well as to the nature of the data.