Reactions of Japanese markets to changes in credit ratings by global and local agencies Article

Li, J, Shin, YS, Moore, WT. (2006). Reactions of Japanese markets to changes in credit ratings by global and local agencies . JOURNAL OF BANKING & FINANCE, 30(3), 1007-1021. 10.1016/j.jbankfin.2005.05.026

cited authors

  • Li, J; Shin, YS; Moore, WT

authors

abstract

  • We examine data from the mid-1980s to 2003 to investigate whether stock prices set on the Tokyo Stock Exchange for Japanese firms react more strongly to changes in credit ratings of global rating agencies than of local agencies. This offers a strong test of relative influence of the two groups of rating agencies. We hypothesize that global raters will have more influence, but given that the two global agencies, Moody's and Standard and Poors, are headquartered in the United States, analysis of stocks of Japanese firms listed on US exchanges would confound the results to the extent there is a home bias for raters. We find that global agencies are more influential than the two major local raters, Japan Rating and Investment Information and Japan Credit Rating Agency, for rating downgrades. Thus for credit downgrades, global raters are more influential than local ones even in the local market. Consistent with previous research, we find that upgrades are benign events, and this holds true for global as well as local agencies. © 2005 Elsevier B.V. All rights reserved.

publication date

  • March 1, 2006

published in

Digital Object Identifier (DOI)

start page

  • 1007

end page

  • 1021

volume

  • 30

issue

  • 3