The announcement impact of the credit rating change of bonds in Common Stock returns
An analytical study of a sample of companies listed in Financial Abu Dhabi Market
A Dissertation Submitted
To
Council of the College of Administration and Economics, Karbala University, in Partial Fulfillment of the Requirements for PH.D. Degree in Business In Banking & Financial sciences
By
Sadoon Abas Mohammed Al- saidy
Under The Supervision
Assistant professor Dr. Methak Hatf AL- Fatlawi
Assistant professor Dr. Saadi Ahmed Humaid Al-Musawi
Abstract
The Purpose of this Study is to Investigate the Response of Stock Companies that Issued Debt Instruments (ADS) listed on the Abu Dhabi Exchange to obtain the content of the Information sent by Moody’s Credit Rating for the Period “January1, 2005 – May 30, 2017”. The Methodology of event we used to ascertain the response Market. The methodology of the event study and the event window was used 15 days prior to the event and 15 days after the event to test the efficiency of the market. The study focused on testing the effect of announcing the changes in the first steps, upgrade, downgrade or confirming the credit score, The study included the following hypotheses:
1- There is no impact the announcement of credit Rating change for corporate bonds in their common stock returns.
2- The announcement of credit arrangements for bonds is not different depending on the industries.
3- Abu Dhabi Securities Exchange is half-efficient in responding to the content of advertising credit rating.
The study showed that there is an influential information content to announce credit ratings in the returns of ordinary shares, with different responses between negative and positive and by type of advertisement. It was also found that the companies sample study individually differ in their response to the announcement, where the banks were more responsive than other companies and most of the response was positive while the insurance companies saw a negative impact on the returns of their shares, and noted high negative returns before and after the announcement On promotions for credit ratings and contrary to market expectations that an upgrade of credit score could lead to extraordinary positive returns.
The impact of this study has led to exceptional returns that vary according to the advertisements. This indicates that the Abu Dhabi market is not efficient in the semi-strong form.
The study reached a number of recommendations, the most important of which was to encourage the establishment of local agencies and reduce obstacles to entry of new agencies to financial markets and labor. To increase efficiency and activate the performance of the Abu Dhabi Securities Market, which contributes to reducing information asymmetry among investors, and encourage Iraqi companies to enter the issuance of debt securities and listing in the Iraqi market for securities to finance its activities, whether financial or non-financial, leading To promote n Market and economy.
