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The Effect of Sovereign Credit Ratings on CDS Premiums: An Event Study on Developed and Developing Countries

Year 2022, , 135 - 158, 27.04.2022
https://doi.org/10.33203/mfy.1067002

Abstract

This study aims to examine whether credit ratings effect country CDS premiums in developed and developing countries and whether the effect differs between the two groups. For this purpose, CDS premiums of 26 developed and developing countries for the period of January 2005-October 2021, the announcements of credit rating agencies and event analysis method
were employed. The results show that CDS premiums in developed countries are not statistically affected by negative announcements, but the response to positive announcements is statistically significant. On the other hand, CDS premiums in emerging countries are significantly affected by both positive and negative rating announcements.

References

  • Afonso, A., Furceri, D., & Gomes, P. (2011). Sovereign credit ratings and financial market linkages: Application to European data. Frankfurt: European Central Bank.
  • Balat, A. ve İskenderoğlu Ö. (2018), Ülke Kredi Notlarının CDS Primleri Üzerindeki Etkisi: BRICS Ülkeleri ve Türkiye Üzerine Bir Uygulama, BDDK Bankacılık ve Finansal Piyasalar Dergisi, 12(2), 47-64.
  • Binici, M., & Hutchison, M. (2018). Do credit rating agencies provide valuable information in market evaluation of sovereign default risk? Journal of International Money and Finance, 85, 58-75.
  • Blau Benjamin, M., Roseman Brian, S. (2014). The Reaction of European Credit Default Swap Spreads to the U.S. Credit Rating Downgrade. International Review of Economics and Finance, 34, 131-141.
  • Brown, S., & Warner, J. (1985). Using daily stock returns: The case of event studies. Journal of Financial Economics, 14, 3-31.
  • Chodnicka-Jaworska, P. (2017). Information value of the credit rating on the credit default swaps market. Metody Ilościowe w Badaniach Ekonomicznych / Szkoła Główna Gospodarstwa Wiejskiego, 18(XVIII)(3). 18.3.39.
  • Doplerala, L.&Ilczuk, D. (2020). Sovereign credit ratings and CDS spreads in Emerging Europe. Quarterly Journal of Economics and Economic Policy, 15(3), 419-438.
  • Drago, D., & Gallo, R.(2016). The impact and the spillover effect of a sovereign rating announcement on the euro area CDS market. Journal of International Money and Finance, 67, 264-286.
  • Finnerty, J. D., Miller, C. D., & Chen, R. R. (2013). The impact of credit rating announcements on credit default swap spread. Journal of Banking & Finance 37 (6, 2011-2030.
  • Henderson, G. V. (1990). Problems and solutions in conducting event studies. Journal of Risk and Insurance, 57, 282-306. Hull, J. C., Predescu, M., & White, A. (2004). The relationship between credit default swap spreads, bond yields, and credit rating announcements. Journal of Banking and Finance 28, 2789–2811.
  • Ismailescu, I., & Kazemi, H. (2010). The reaction of emerging market credit default swap spreads to sovereign credit rating changes. Journal of Banking & Finance 34, 2861–2873.
  • Kaya Öner, E., Kaya, B., & Yalçıner, K. (2015). Reaction of Credit Default Swap Spreads to Rating Announcements: An Event Study for Turkey. Journal of Economics, Finance and Accounting, 2(4), 558-571.
  • Lehnert, T. ve Neske, F. (2004). On the Relationship between Credit Rating Announcements and Credit Default Swap Spreads for European Reference Entities. Journal of Credit Risk, 2(2), 83-90.
  • Mackinlay, A.C. (1997). Event Studies in Economics and Finance. Journal of Economic Literature, 13-39.
  • Micu, M., Remolona, E. M. ve Wooldridge, P. D. (2004), The Price Impact of Rating Announcements: Evidence from The Credit Default Swap Market, BIS Ouarterly Review, p.55‐66.
  • Micu, M., Remolona, E. ve Woolridge, P. (2006), The Price Impact of Rating Announcements: Which Announcements Matter?, BIS Working Papers, No: 207.
  • Norden, L., & Weber, M. (2004). Informational efficiency of credit default swap and stock markets: the impact of credit rating announcements. Journal of Banking and Finance 28,, 2813–2843.
  • Wang, J., Svec, J. ve Peat, M. (2014). The Information Content of Ratings: An Analysis of Australian Credit Default Swap Spreads. A Journal of Accounting, Finance and Business Studies, 50(1), 56-76.
  • Wengner, A., Burghof, H. P. ve Schneider, J. (2015), The Impact of Credit Rating Announcements on Corporate CDS Markets—Are Intra‐Industry Effects Observable?, Journal of Economics and Business, 78, p.79‐91.
  • Yılmaz, E.D. (2014). Sovereign Credit Default Swap Market Response to Credit Rating Announcements: An Event Study on Emerging Markets, Yüksek Lisans Tezi, Boğaziçi Üniversitesi Sosyal Bilimler Enstitüsü, İstanbul

Ülke Kredi Notlarının CDS Primleri Üzerindeki Etkisi: Gelişmiş ve Gelişmekte Olan Ülkeler Üzerine Bir Olay Analizi

Year 2022, , 135 - 158, 27.04.2022
https://doi.org/10.33203/mfy.1067002

Abstract

Bu çalışmanın amacı gelişmiş ve gelişmekte olan ülkelerde kredi derecelerinin ülke CDS primleri üzerinde etkili olup olmadığının ve etkinin gelişmiş ve gelişmekte olan ülkeler arasında farklılık gösterip göstermediğinin incelenmesdir. Bu amaçla dünya ekonomisinde ağırlığı olan 17 gelişmiş ve 9 gelişmekte olan ülkenin 4 Ocak 2005 ile 12 Ekim 2021 dönemi için ABD doları cinsinden 5 yıl vadeli devlet tahvillerine ilişkin CDS primleri ile S&P, Moody’s ve Fitch kredi derecelendirme kuruluşlarının söz konusu ülkelerin kredi notu veya görünümüne ilişkin yaptıkları duyurular kullanılarak, olay analizi yöntemiyle araştırma sorularına yanıt aranmıştır. Analiz sonuçları gelişmiş ülkelerde CDS primlerinin negatif duyurulardan istatistiksel olarak anlamlı ölçüde etkilenmediğini, pozitif duyurulara verilen tepkinin ise istatistiksel olarak anlamlı olduğunu göstermektedir. Öte yandan, gelişmekte olan ülkelerde CDS primleri hem pozitif hem de negatif derecelendirme duyurularından anlamlı ölçüde etkilenmektedir. Bu bulgular gelişmekte olan ülkeler açısından daha önce yapılan bazı çalışmaların bulgularıyla paralellik arz ederken, gelişmiş ülkelerin negatif duyurulara verdiği tepki açısından bir çalışmanın bulgularıyla örtüşmemektedir.

References

  • Afonso, A., Furceri, D., & Gomes, P. (2011). Sovereign credit ratings and financial market linkages: Application to European data. Frankfurt: European Central Bank.
  • Balat, A. ve İskenderoğlu Ö. (2018), Ülke Kredi Notlarının CDS Primleri Üzerindeki Etkisi: BRICS Ülkeleri ve Türkiye Üzerine Bir Uygulama, BDDK Bankacılık ve Finansal Piyasalar Dergisi, 12(2), 47-64.
  • Binici, M., & Hutchison, M. (2018). Do credit rating agencies provide valuable information in market evaluation of sovereign default risk? Journal of International Money and Finance, 85, 58-75.
  • Blau Benjamin, M., Roseman Brian, S. (2014). The Reaction of European Credit Default Swap Spreads to the U.S. Credit Rating Downgrade. International Review of Economics and Finance, 34, 131-141.
  • Brown, S., & Warner, J. (1985). Using daily stock returns: The case of event studies. Journal of Financial Economics, 14, 3-31.
  • Chodnicka-Jaworska, P. (2017). Information value of the credit rating on the credit default swaps market. Metody Ilościowe w Badaniach Ekonomicznych / Szkoła Główna Gospodarstwa Wiejskiego, 18(XVIII)(3). 18.3.39.
  • Doplerala, L.&Ilczuk, D. (2020). Sovereign credit ratings and CDS spreads in Emerging Europe. Quarterly Journal of Economics and Economic Policy, 15(3), 419-438.
  • Drago, D., & Gallo, R.(2016). The impact and the spillover effect of a sovereign rating announcement on the euro area CDS market. Journal of International Money and Finance, 67, 264-286.
  • Finnerty, J. D., Miller, C. D., & Chen, R. R. (2013). The impact of credit rating announcements on credit default swap spread. Journal of Banking & Finance 37 (6, 2011-2030.
  • Henderson, G. V. (1990). Problems and solutions in conducting event studies. Journal of Risk and Insurance, 57, 282-306. Hull, J. C., Predescu, M., & White, A. (2004). The relationship between credit default swap spreads, bond yields, and credit rating announcements. Journal of Banking and Finance 28, 2789–2811.
  • Ismailescu, I., & Kazemi, H. (2010). The reaction of emerging market credit default swap spreads to sovereign credit rating changes. Journal of Banking & Finance 34, 2861–2873.
  • Kaya Öner, E., Kaya, B., & Yalçıner, K. (2015). Reaction of Credit Default Swap Spreads to Rating Announcements: An Event Study for Turkey. Journal of Economics, Finance and Accounting, 2(4), 558-571.
  • Lehnert, T. ve Neske, F. (2004). On the Relationship between Credit Rating Announcements and Credit Default Swap Spreads for European Reference Entities. Journal of Credit Risk, 2(2), 83-90.
  • Mackinlay, A.C. (1997). Event Studies in Economics and Finance. Journal of Economic Literature, 13-39.
  • Micu, M., Remolona, E. M. ve Wooldridge, P. D. (2004), The Price Impact of Rating Announcements: Evidence from The Credit Default Swap Market, BIS Ouarterly Review, p.55‐66.
  • Micu, M., Remolona, E. ve Woolridge, P. (2006), The Price Impact of Rating Announcements: Which Announcements Matter?, BIS Working Papers, No: 207.
  • Norden, L., & Weber, M. (2004). Informational efficiency of credit default swap and stock markets: the impact of credit rating announcements. Journal of Banking and Finance 28,, 2813–2843.
  • Wang, J., Svec, J. ve Peat, M. (2014). The Information Content of Ratings: An Analysis of Australian Credit Default Swap Spreads. A Journal of Accounting, Finance and Business Studies, 50(1), 56-76.
  • Wengner, A., Burghof, H. P. ve Schneider, J. (2015), The Impact of Credit Rating Announcements on Corporate CDS Markets—Are Intra‐Industry Effects Observable?, Journal of Economics and Business, 78, p.79‐91.
  • Yılmaz, E.D. (2014). Sovereign Credit Default Swap Market Response to Credit Rating Announcements: An Event Study on Emerging Markets, Yüksek Lisans Tezi, Boğaziçi Üniversitesi Sosyal Bilimler Enstitüsü, İstanbul
There are 20 citations in total.

Details

Primary Language Turkish
Subjects Finance
Journal Section Articles
Authors

Sinem Uçarkaya 0000-0002-6274-9450

Şenol Babuşcu 0000-0003-2870-6358

Adalet Hazar 0000-0002-1483-8360

Publication Date April 27, 2022
Submission Date February 4, 2022
Published in Issue Year 2022

Cite

APA Uçarkaya, S., Babuşcu, Ş., & Hazar, A. (2022). Ülke Kredi Notlarının CDS Primleri Üzerindeki Etkisi: Gelişmiş ve Gelişmekte Olan Ülkeler Üzerine Bir Olay Analizi. Maliye Ve Finans Yazıları(117), 135-158. https://doi.org/10.33203/mfy.1067002

Dergi özellikle maliye, finans ve bankacılık alanlarında faaliyet göstermektedir.