This paper shows that studies of announcement effects of bond rating changes should take into account the initial rating. First, we provide theoretical support for different price effects as a non-linear function of the initial credit rating, using a structural, Merton-type model linking the...

This paper investigates information transfer effects of bond rating downgrades measured by equity abnormal returns for industry portfolios. Industry rivals can be subject to two opposing effects, the contagion effect and the competition effect. We find that the net effect is strongly dependent...

Over the latest twenty years, the average credit rating of U.S. corporations has trended down. This observation has been interpreted as evidence that rating agencies have been tightening credit standards. More formally, Blume, Lim, and MacKinlay (1998) model the credit rating process by an...