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“Too big to downgrade”: the response of financial analysts to bond downgrades of money center banks

“Too big to downgrade”: the response of financial analysts to bond downgrades of money center banks Outlines previous research on the effects of bond rating changes on the share prices of US banks, noting opposing views on whether they contain new information. Examines revisions in analysts’ earnings forecasts for downgraded and non‐downgraded banks (separating regional banks from large money centres) to test the value of this information using 1981‐1991 data on 14 downgrades of money centre banks; and explains the methodology used. Shows that downgrades affected forecasts for the downgraded banks and other money centre banks but not for regional banks. Concludes that bond rating agencies assist market discipline by providing useful information on risk. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Managerial Finance Emerald Publishing

“Too big to downgrade”: the response of financial analysts to bond downgrades of money center banks

Robert Schweitzer; Samuel H. Szewczyk; Raj Varma
Managerial Finance , Volume 26 (2): 11 – Feb 1, 2000
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Publisher
Emerald Publishing
Copyright
Copyright © 2000 MCB UP Ltd. All rights reserved.
ISSN
0307-4358
DOI
10.1108/03074350010766486
Publisher site
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Abstract

Outlines previous research on the effects of bond rating changes on the share prices of US banks, noting opposing views on whether they contain new information. Examines revisions in analysts’ earnings forecasts for downgraded and non‐downgraded banks (separating regional banks from large money centres) to test the value of this information using 1981‐1991 data on 14 downgrades of money centre banks; and explains the methodology used. Shows that downgrades affected forecasts for the downgraded banks and other money centre banks but not for regional banks. Concludes that bond rating agencies assist market discipline by providing useful information on risk.

Journal

Managerial Finance – Emerald Publishing

Published: Feb 1, 2000

Keywords: Accounting research; Risk rating; Banking; Financial analysts; Forecasting; USA

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