Does Bond Rating Matter?

This book examines the information value of rating changes announcements in the United Kingdom (UK). The dissertation focuses on the bond rating changes assigned by S&P Corporation and Moody¿s Corporation in the UK between 1997 and 2006. The main purpose of this research is to determine whether there is significant support for the private information hypothesis based on evidence of bond rating changes announcements and their impact drawn from this period. More specifically, the event study was implemented in order to examine the abnormal share performance during this period in the UK. There are five studies presented in this work. Based on a standardised cross-sectional parametric t-test, as proposed by Boehmer, Musumeci and Poulsen (1991), on 299 corporate bond rating changes announced by S&P and Moody¿s, the first study shows that, based on sub-period analysis, no abnormal share return is detected in the UK. However, the rating downgrade announcements show significant negative market reaction.