Apergis, Nicholas and Payne, James E. and Tsoumas, Chris (2011): Credit rating changes’ impact on banks: evidence from the US banking industry.
Download (296kB) | Preview
This study examines the impact of credit rating upgrades and downgrades on six comprehensive banks’ asset classes, profitability, leverage and size using data from the Federal Deposit Insurance Corporation’s call reports and Bloomberg over the period 1989-2008. In summary, the results suggest that a downgrade has a lasting and relatively more severe impact on banks than an upgrade; however, downgraded banks do not seem to effectively reduce their appetite for risk over a longer horizon. It seems that the role of credit rating agencies as an integral part of banks’ prudential supervision through market discipline is, in a longer horizon, overstated.
|Item Type:||MPRA Paper|
|Original Title:||Credit rating changes’ impact on banks: evidence from the US banking industry|
|Keywords:||Credit rating changes; banks; market discipline|
|Subjects:||G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation
C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C21 - Cross-Sectional Models ; Spatial Models ; Treatment Effect Models ; Quantile Regressions
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages
|Depositing User:||Chris Tsoumas|
|Date Deposited:||31. Dec 2011 00:39|
|Last Modified:||24. Mar 2015 14:37|
Berger, A. N., S. M. Davies, and M. J. Flannery (2000). Comparing Market and Regulatory Assessments of Bank Performance: Who Knows What When?, Journal of Money, Credit and Banking 24, 641-667.
Bertrand, M., E. Duflo, and S. Mullainathan (2004). How Much Should we Trust Differences-in-Differences Estimates?, Quarterly Journal of Economics 119, 249-257.
Billett, M., J. Garfinkel, and E. O’Neal (1998). The Cost of Market versus Regulatory Discipline in Banking, Journal of Financial Economics 48, 333-358.
Bliss, R. R. and M. J. Flannery (2002). Market Discipline in the Governance of U.S. Bank Holding Companies: Monitoring versus Influencing, European Finance Review 6, 361–395.
Boot, A. W., T. T. Milbourn, and A. Schmeits (2006). Credit Ratings as Coordination Mechanisms, Review of Financial Studies 19, 81-118.
Brealey, R. A. and S. C. Myers (2003). Principles of Corporate Finance, 7th edition, McGraw-Hill.
Brooks, R., R. W. Faff, D. Hillier, and J. Hillier (2004). The National Market Impact of Sovereign Rating Changes, Journal of Banking and Finance 28, 233-250.
Ederington, L. H. and J. C. Goh (1998). Bond Rating Agencies and Stock Analysts: Who Knows What When?, Journal of Financial and Quantitative Analysis 33, 569-363.
Faulkender, M. and M. Petersen, (2006). Does the Source of Capital Affect Capital Structure?, Review of Financial Studies 19, 45-79.
Flannery, M., (2008). The Subprime Crisis: Lessons about Market Discipline, Working paper, University of Florida.
Flannery, M. J., S. H. Kwan, and M. Nimalendran (2004). Market Evidence on the Opaqueness of Banking Firms’ Assets, Journal of Financial Economics 71, 419–460.
Flannery, M. J. and S. Nikolova (2004). Market Discipline of U.S. Financial Firms: Recent Evidence and Research Issues, in Market Discipline across Countries and Industries, edited by C. Borio, W. Hunter, G. Kaufman, and K. Tsatsaronis, Cambridge, MA: MIT Press.
Gonzalez, F., F. Haas, R. Johannes, M. Persson, L. Toledo, R. Violi, M. Wieland, and C. Zins, (2004). Market Dynamics Associated with Credit Ratings: A Literature Review, European Central Bank, Occasional Paper Series (16).
Graham, J. R., and C. R. Harvey (2001). The Theory and Practice of Corporate Finance: Evidence from the Field, Journal of Financial Economics 60, 187-243.
Greenbaum, S. I., and A. V. Thakor, (2007). Contemporary Financial Intermediation, Second Edition, Academic Press.
Hand, J. R. M., R. W. Holthausen, and R. W. Leftwich (1992). The Effect of Bond Rating Agency Announcements on Bond and Stock Prices, Journal of Finance 47, 733-52.
Jorion, P., Z. Liu, and C. Shi (2005). Informational Effects of Regulation FD: Evidence from Rating Agencies, Journal of Financial Economics 76, 309-330.
Kang, Q. and Q. Liu, (2009). Credit Rating Changes and CEO Incentives, working paper.
Kisgen, D. J. (2006). Credit Ratings and Capital Structure, Journal of Finance 61, 1035-1072.
Kisgen, D. J. (2009). Do Firms Target Credit Ratings or Leverage Levels?, Journal of Financial and Quantitative Analysis 44, 1323-1344.
Kuang, Y. F. and B. Qin (2009). Credit Rating and CEO Risk-Taking Incentives, working paper
Morgan, P. D. (2002). Rating Banks: Risk and Uncertainty in an Opaque Industry, American Economic Review 92, 874-888.
Myers, S. C. and R. G. Rajan. (1998). The Paradox of Liquidity, Quarterly Journal of Economics 113, 733-771.
Rajan, R. G., (2001). Comment on ‘Market Discipline in the Governance of U.S. Bank Holding Companies: Monitoring versus Influencing’ in Frederic Mishkin (ed.) Prudential Supervision: What Works and What Doesn’t, Chicago: University of Chicago Press, 143-145.
Palvia A. A. and D. K. Patro, (2010). Re-Examining the Role of Market Discipline for Bank Supervision: Evidence from the Subprime Crisis, working paper.
Tang, T. T. (2009). Information Asymmetry and Firms’ Credit Market Access: Evidence from Moody's Credit Rating Format Refinement, Journal of Financial Economics 93, 325-351.