The adverse effects of systematic leakage ahead of official sovereign debt rating announcements

@article{Michaelides2015TheAE,
  title={The adverse effects of systematic leakage ahead of official sovereign debt rating announcements},
  author={A. Michaelides and A. Milidonis and George P. Nishiotis and Panayiotis Papakyriakou},
  journal={Journal of Financial Economics},
  year={2015},
  volume={116},
  pages={526-547}
}
Rating agencies consult with local government officials several days prior to official announcements of sovereign debt rating changes, making information leakage likely. Using cross-country data from 1988 to 2012, we find evidence of information leakage. In particular, we find statistically and economically significant negative daily abnormal stock index returns prior to downgrade announcements. These effects are more pronounced in countries with lower institutional quality, and they persist… Expand
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