Does the American stock market react differently to rating announcements during a crisis period? The case of the 2008 worldwide financial crisis

Abstract EN

Rating agencies seem to be an important actor on financial markets.

Indeed, their announcements have informational and securing role on investor’s decisions.

However, recent crisis’ occurrences put the blame on rating agencies for having failed in achieving one of their central roles : downgrading firms at a just time.

The global financial turmoil of 2008 offers a unique context to examine market reaction to rating announcements during a crisis.

We use a comparative event study, which compares abnormal returns following rating announcements during a crisis period to those during stable periods.

Results show that there is an overreaction to bad news and an insignificant impact of good and neutral news.

Lastly, we show a change in agencies attitude toward deteriorated financial conditions.