Publication Type
Journal Article
Version
submittedVersion
Publication Date
6-2019
Abstract
The Dodd–Frank Act (Section 939B) enacted in 2010 repealed the exemption of credit rating agencies (CRAs) from Regulation Fair Disclosure. Testing whether CRAs continue to provide new information to the market after the repeal, the authors find that the significant prerepeal stock price responses to rating changes disappear after the regime change. Bond price reactions, however, remain significant. These results are even more significant at the investment–speculative boundary. Evidence suggests that CRAs served as a conduit for transmitting private information before the repeal and that the continued bond price reactions are likely due to regulations favoring higher-rated bonds.
Keywords
Fixed income and structured finance, information providers/credit ratings
Discipline
Finance and Financial Management | Portfolio and Security Analysis
Research Areas
Finance
Publication
Journal of Fixed Income
Volume
29
Issue
1
First Page
6
Last Page
19
ISSN
1059-8596
Identifier
10.3905/jfi.2019.29.1.006
Publisher
Institutional Investor Inc
Citation
EDERINGTON, Louis H.; GOH, Jeremy C.; LEE, Yen Teik; and YANG, Lisa Zongfei.
Are bond ratings informative? Evidence from regulatory regime changes. (2019). Journal of Fixed Income. 29, (1), 6-19.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/6437
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.3905/jfi.2019.29.1.006