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| Type | Master's Thesis |
| Scope | Discipline-based scholarship |
| Title | The Effect of Credit Rating Announcements on Bond Prices in the Swiss Market |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Number of Pages | 80 |
| Date | 2017 |
| Abstract Text | With globalization and the increasing complexity of financial structures, credit rating agencies (CRAs) have gained an increasingly important role in the financial system. A CRA supplies information to the market by disclosing its opinion about the creditworthiness of a debtor. This opinion comes in form of a credit rating and reflects the default probability of a rated entity. Especially smaller investors who do not have the required resources to assess the credit quality of an entity themselves rely on the credit ratings provided by the CRAs. However, credit ratings are not only used by investors, but they are also increasingly used in regulations, even at the international level. Many institutional investors are required by internal or external regulation to consider credit ratings. Therefore, credit ratings have a substantial influence on the capital market. Due to the extended use and the important role of credit ratings, it is unsurprising if a sudden change in a credit rating leads to a reaction in market prices of the affected securities. Specifically, since a change in credit rating implies a change in the assessed credit risk of a specific issuer, one can expect market prices of this issuer’s securities to adjust according to the updated credit rating. A CRA may announce a change in its opinion about the credit quality of an issuer in various forms. These credit rating announcements may take place as a direct change in credit rating – i.e. as an upgrade or downgrade – or as a revision in outlook, which can be either positive or negative. These types of announcements of the CRAs Moody’s, Standard & Poor’s and Fitch will be the point of focus in this study. |
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