Impact of corporate credit rating announcements on stock returns: Evidence from the banking sector

Abstract

Credit ratings announced by international credit rating agencies are taken into account by domestic and foreign investors. Earlier research has thoroughly examined the impact of sovereign credit rating announcements on stock prices. However, the specific impact of credit rating announcements for firms-especially for banks - has received limited attention in financial literature, particularly in the context of developing economies. This study aims to assess the semi-strong form efficiency of the banking firms in Türkiye in reaction to corporate credit rating announcements released by Moody’s Investor Service (Moody’s), Capital Intelligence Ratings (CI), JCR Eurasia, and Fitch Ratings (Fitch) from 2023 to 2024 using an event study. It is found that the Turkish banking sector showed semi-strong form market efficiency in response to these announcements in 2023 and 2024. This suggests that it may enhance the confidence of both domestic and international investors in the country’s stock markets, especially the banking sector.