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The Influence of Rating Changes on Bonds

Diploma Thesis 2006 73 Pages

Business economics - Banking, Stock Exchanges, Insurance, Accounting

Excerpt

Contents

List of Abbreviations

List of Figures

List of Tables

1 Introduction
1.1 Presentation of the Problem
1.2 Basic Concepts
1.3 Objective and Structure of the Thesis

2 Rating of Corporate Bonds
2.1 Definition and Role of Credit Rating on the Capital Market
2.2 Historical Development
2.3 Rating Classification
2.4 The Rating Process
2.4.1 Organization
2.4.2 Analysis Criteria of Rating Agencies
2.4.3 Qualitative Aspects in the Analysis of Company Risk
2.4.4 Quantitative Aspects in the Analysis of Company Risk
2.5 The Rating Market of Corporate Bonds

3 The Influence of Rating Changes on Bonds
3.1 The Interdependence between Bond Credit Risk and Rating
3.1.1 Bond Ratings and Credit Risk
3.1.2 Theoretical Models for Credit Risk Evaluation
3.1.2.1 Statistical Prediction of Default Likelihood – Stochastic Processes
3.1.2.2 Option-theoretic Approach
3.1.3 Credit Rating Models in Practice
3.1.3.1 Migration Analysis
3.1.3.2 Credit Risk Practical Applications
3.2 Influence of Rating Changes on Bonds in Theory and Practice
3.2.1 Rating in the Neoclassical Financial Theory
3.2.1.1 The Concept of Information Efficient Markets
3.2.1.2 Theoretical Relevance of Rating in Efficient Markets
3.2.1.3 Information Basis of Rating Verdicts
3.2.1.4 Hypotheses about Influence of Rating Changes on Bonds Prices
3.2.2 Rating in Real Capital Markets – Empirical Research
3.2.2.1 Event Studies
3.2.2.2 Presentation of the Conducted Research
3.2.2.3 Conclusions
3.2.3 Explanations of Divergences between Theoretical and Empirical Research
3.2.3.1 The Non-equidistant Character of Rating Verdicts
3.2.3.2 Different Definitions of Risk
3.2.3.3 Investment Regulations and Restrictions
3.3 Significant Examples of Rating Influence on Corporate Bonds
3.3.1 Telefonica
3.3.2 General Motors
3.4 Influence of Rating Changes of a Bond on other Investment Alternatives

4 Contemporary Aspects of Rating Influence on Capital Markets
4.1 Rating in Germany
4.2 Rating of Landesbanken and Savings Bank
4.3 Rating and Basel II
4.4 Possibilities and Limits of Rating

5 Conclusion and Future Perspectives

References

APPENDIX

List of Abbreviations

illustration not visible in this excerpt

List of Figures

Fig. 1: The Main Stages and Contents of the Rating Process

Fig. 2: Traded Bonds Volumes on International Markets

Fig. 3: History of Global Corporate Finance Ratings Changes between 1991 and 2004

Fig. 4: Credit Spreads Course of Different Rating Categories of Corporate Bonds

Fig. 5: One, Five and Ten Years Default Rates by Rating Categories between

1923 and 2005

Fig. 6: Ten Years Rating Transition Matrix

Fig. 7 The Relationship between Return and Rating on the US Capital Market

Fig. 8: Evolution of Telefonica Credit Spreads between 3.10.2005 and 3.11.2005

Fig. 9: Evolution of “General Motor 2006” Credit Spread in Comparison with

Average Global High Yield Credit Spreads

Fig. 10: Growth of Corporate Bonds Rating in Germany between 1999-2004

List of Tables

Table 1: Meaning of Rating Symbols from Leading Rating Agencies

Table 2: Rating of Landesbanks after Withdrawal of State Guarantees

Table 3: Traded Bonds Volumes on International Markets

Table 4: Telefonica Credit Spreads between 03.10.2005 and 02.11.2005

Table 5: ”General Motors 2006” Rating Changes between 1999 and 2005

1 Introduction

1.1 Presentation of the Problem

Capital markets all over the world have undergone fundamental changes in the last twenty years and the most prominent developments have been: disintermediation and securitization, globalization and financial innovations[1]. This process has been accelerated by worldwide deregulation tendencies, as well as progress and global proliferation of transactional data processing and transmission technology. The rational investor disposing of limited time and means for making a decision has been thus confronted with new challenges in a global environment dominated by almost infinite and very complex investment possibilities. Because of limited resources, private clients as well as institutional investors have been increasingly overwhelmed by internally assessing credit risk and have sought for additional evaluations from external specialists in order to build an opinion about the risk and return profile of an obligation[2]. With this background, rating issued by major international rating agencies has come to play a key role in the making of investment decisions and in supervisory regulation. It is especially important in this context to understand the impact of rating changes on capital markets.

The influence of rating changes on bond prices is subject of controversial discussions. Despite the undisputable importance of rating in markets, the debate has been fueled by spectacular insolvencies of high rated companies, such as Enron, WorldCom and Parmalat. Accordingly, measuring and assessing the information content of ratings has been in the United States the object of intense theoretical and empirical research for decades, and the lively ongoing dispute surrounding the topic is far from being concluded. However, analyses on this subject were not initiated outside the US market until the last years. This is especially surprising in the context of international markets, with different accounting and investment regulations, where advantages of rating are even greater. The integration of national financial markets, Basel II impulses and the expansion of rating activities on global level have amplified the necessity of research in this field.

Therefore, it is of paramount importance for the future of the financial sector to thoroughly investigate information content of rating and its impact on securities prices in order to build a solid scientific foundation for this subject and to thus present a reliable frame of reference for the activities of financial markets.

1.2 Basic Concepts

The notion of rating has been in time widely used in various contexts, so it is necessary to circumscribe its meaning within the scope of this work. Rating is actually defined as an assessment or classification of somebody or something on a scale, according to how much or how little of a quality he, she, or it possesses[3]. In the context of financial markets, rating has developed into an entire concept and is understood as an expression of credit risk and default probability. Rating is to be interpreted in the context of this work as credit rating, which will be explained in detail in chapter 2.

Rating has many applications in the financial realm, which have led to different rating categories, after several criteria. However, external rating is widely accepted and employed on capital markets and serves best the purpose of researching the impact rating changes have on bonds. Therefore, rating is to be understood as external rating in the present work, with the exception of chapter 4.3, where rating in the context of Basel II and Internal Rating-Based approach should be interpreted as internal rating.

A large variety of financial instruments and issuers are rated, so rating can refer to different financial categories. However, leading international rating agencies concentrate their business on credit rating and default risk evaluation of bonds. Bonds were the initial object of rating actions and represent currently a large percent of the total business activity in this domain[4]. Moreover, rating of corporate bonds constitutes the most appropriate sample for scientifical research regarding the impact of rating changes on the market. For all these reasons, the present work will relate to rating of corporate bonds, unless otherwise intently stated.

1.3 Objective and Structure of the Thesis

The goal of this work is to investigate the impact of rating changes on bonds in financial markets, underlining the most significant influences and developments in this field.

The present work is divided in five chapters, of which the first one represents the introduction to this work. The second chapter gives an overview of rating of corporate bonds, explains the organization and the relevant informational inputs in the rating process, stressing upon the quantitative and qualitative aspects, and comments the present situation on the rating market.

The third chapter analyzes the relevant facets regarding the influence of rating changes on bonds. It first explains the intricate connection between bonds credit risk and rating and then introduces the theoretical framework and practical method used by rating agencies to formulate credit risk opinions. The second section examines the information content of rating within the neoclassical finance theory and advances several hypotheses about influence of rating changes on bonds. Special attention is dedicated to the type of information that potentially flows in rating verdicts and to the implication in markets characterized by different grades of efficiency. After laying a solid theoretical foundation, the work critically analyzes the results of numerous empirical studies and then draws the conclusions. Possible explanations for divergences between theory and practice are offered. The theoretical and empirical results are then used in the analysis of two self-developed case studies, exemplifying two real typical situations for the existing controversy in this field. Finally, the presentation of rating changes influence on other investment alternatives completes the picture.

The fourth chapter investigates several contemporary aspects of the rating industry. The first section gives a detailed view of the latest developments and trends on the German rating market. Then, the recent rating implications for the withdrawal of state guarantee for landesbanks and savings banks are illustrated. The third section presents the regulatory role of rating in the context of Basel II accord and the consequences for banks. Finally, the possibilities and limits of rating in the modern financial universe are explored. The fifth chapter summarizes the findings of this work and provides an outlook.

2 Rating of Corporate Bonds

In the vast majority of cases, credit risk and default probability of an investment are expressed through ratings provided by international rating agencies. This chapter introduces the concept of credit rating of corporate bonds and explains its role in the financial universe. The rating process is thoroughly described, especially the analysis criteria and the quantitative and qualitative factors, since it is very important to determine what kind of information flows in a rating verdict and how a rating opinion comes into being, in order to be able to later analyze the information content of rating changes in theoretical and empirical context. The final section concludes by presenting developments of the bond market.

2.1 Definition and Role of Credit Rating on the Capital Market

Credit rating is a qualified assessment and formal evaluation of a company’s credit history, legal obligation and capability of repaying financial commitments. It measures the default likelihood of the issuer (or of the issued bond) and its ability to meet fully and timely its financial debt obligations, such as: interest, repayment of the principal, preferred dividends, etc. from the issuance date to maturity date[5]. The maturity can vary from a few days to 30 years. A credit defaults not only when payments are completely left out, but also in cases of delay in payment. Ratings give information about the default likelihood as well as regarding the gravity of a default. The two indicators combined define the expected loss of a debt[6].

Credit ratings can be assigned to sovereign governments, public finance entities, corporations, financial organizations and the securities or other obligations they issue[7]. They represent the result of a rating process, which can be carried out internally, by the creditor itself, or externally, conducted by international credit agencies. External rating is widely accepted and used on the international capital markets because of a number of reasons, such as: specialization, better access to confidential information about the company, public availability of the rating and transparency, powerful advertising effect and the neutrality of rating agencies[8]. Therefore, rating is to be understood as external rating in the context of this work, except in chapter 4.3, where rating in the context of Basel II and Internal Rating-Based approach should be interpreted as internal rating.

The worldwide leading three rating agencies that provide external rating are S&P, Moody’s and Fitch[9] and their credit rating analyzes financial, branch-related, operational, legal and organizational sides of companies. The result is an opinion regarding the credit risk of the rating object. In current practice this opinion is expressed through rating symbols. Most rating agencies use different versions of the same rating symbols that have been used for the first time by John Moody in 1909 for the rating of railway bonds in the USA[10].

Table 1: Meaning of Rating Symbols from Leading Rating Agencies[11]

illustration not visible in this excerpt

Securities holding a rating of BBB/Bba or better are in the Investment Grade category, while the other segment represents the Speculative Grade or Subinvestment Grade category[12]. All credit ratings are revised and monitored periodically by rating agencies. Depending on the results, the agency can downgrade, upgrade or affirm previously assigned credit rating. Another relevant information instrument represents the Credit Watch Lists. They have been introduced in the 1980s as a reaction to the critic that the market had already anticipated rating changes before actually being released from the agency. The inclusion of a security on a Credit Watch List is an indication of intensive monitoring and of a possible rating change in the direction of the given designation, due to recent developments.

This representation of rating provides investors with comparable information on credit risk based on standard rating scale, regardless of particularities of companies, separate sector of the economy and country as a whole. Consequently, the issuers have access to a global market and can sink their capital costs and the investors receive significant estimation of the investment risk and can optimally distribute their capital[13]. One can infer herefrom, that the main purpose of rating is to reduce the information asymmetry between borrowers and loaners, thus enhancing transparency and efficiency in debt capital markets.

However, ratings have come to fulfill a wide range of functions over time[14]. The multiple and sometimes conflicting roles of rating have been determined by the multitude of users with different goals: institutional investors, issuers and government entities. For the investor, rating has first of all an informative function, regarding the credit risk to the investor. From this derives the risk identification and portfolio structuring function that opens perspectives of using rating in the risk controlling department of banks. Further functions for the investor are the analysis function in the performance evaluation process and the investment monitoring function. From the issuer’s perspective, rating of a well-known and recognized global rating agency brings international acceptance, enables the access to a larger pool of investors and it has a strong advertising effect, minimizing accordingly the capital costs[15]. It also represents an important indicator in the pricing process of a new issuance, as the price of the already existing securities in the same category and with the same rating can be taken as orientation. Rating induces internal benefits as well, giving the company feedback about its strengths and weaknesses and motivating it to further achieve healthy performance, as to avoid a downgrade in the future. Finally, governmental entities have introduced ratings in regulation for banking, insurances, securities, etc. in order to limit risk in financial institutions, for the dual purposes of promoting investor protection and financial market stability. The regulatory aspects of rating will be further discussed in section 4.3 of this work.

This section has explained the concept of rating as it is today and its role on the capital markets. It is important at this point to analyze its evolution as response to various developments of the financial world in order to understand the complex interdependence between credit rating, different forms of investments and the reactions it triggers on debt markets.

2.2 Historical Development

The credit rating business has emerged and developed in the last 100 years. Credit rating applications have spread in numerous borrowing and investment decisions, as well as for regulatory purposes in the United States and worldwide. When the business of credit ratings began in the United States in the early1900s, bond markets - and capital markets generally -had already existed for at least three centuries[16]. In the 19th century, the construction of a railroad network of continental proportion in the United States had triggered an enormous demand for capital that resulted in a huge domestic and international market in the bonded debt of U.S. railroad corporations[17]. Rating appeared as a reaction to the vast number of the issuers and securities, which made necessary the examination and assessment of credit risk[18]. These developments constituted a transfer of some of the investment banker’s reputational capital, as a certifier of the quality of bonds and other obligations, to the ratings agency.

For most of the 20th century, rating agencies were an American phenomenon, but they began taking a global dimension in the 1970s with the expansion of capital markets. The international capital markets were populated by institutional investors choosing among corporate, as well as sovereign issues, from industrial and non-industrial nations, exotic currencies issues and other complex investment possibilities[19]. Rating agencies earned their revenues from issuers rather than subscribers and expanded with the market, collecting revenues from each new issue. Their product range has expanded from bonds to other investment forms such as Commercial Papers, Asset Backed Securities, Mortgages Backed Securities and Eurobonds[20]. A rating market for equity has emerged as well. At that point the dilemma has raised, whether the expansion of credit rating business reflected the economical value of their products or an artificial demand created by regulations. Studies by Hickman (1958) and Atkinson (1967) showed that higher credit ratings were associated with lower default rates and lower promised and realized returns on corporate bonds (as expected if credit ratings captured useful economic information)[21] but the subject remains controversial[22]. This work discusses in chapter 3 the information contents of rating changes in efficient and real markets.

Presently, Moody’s and S&P have together over 2000 analysts in more than 30 countries and their business volume is about 300 to 400 millions USD/year respectively. Fitch has around 1.100 employees and a turnover of 260 millions USD/year, coming closer to the two market leaders[23]. In Europe the integration of the financial markets has only increased the demand of quantitative and qualitative credit rating, because of the language barriers and different accounting regulations[24].

Rating has covered for decades large issuing volumes on the Anglo-Saxon capital markets, but gained in importance on the German capital market only at the beginning of the 90s. The export oriented sectors such as automotive, electrical and chemical industry have represented the initial source of growing rating interest[25]. In 2000, 500 German issuances were rated by S&P and Moody’s (compared to more than 8000 titles in the USA), mostly for industrial bonds traded on the Euro market or in the USA[26]. Rating has become more and more significant on the German markets, as a result of internationalization of the capital market, disintermediation, securitization, more insolvencies and the impulses given by Basel II. Empirical research of the rating market has shown that more than 90% of the companies regard rating as relevant, one third of large companies (more than 250 millions Euro turnover) have already undergone a rating process and 76.7% have planned to request a rating in the future[27]. The situation of rating in Germany will be thoroughly presented in chapter 4.1, in the context of contemporary developments in rating.

2.3 Rating Classification

The dynamic development of new financial instruments in the last two decades has led to the emergence of a multitude of rating categories. One and the same issuer can receive extremely diverging credit ratings, depending upon the credit aspect that is being analyzed. The appearance and evolution of new rating forms has been triggered and modeled mainly by the needs of institutional investors and this pragmatic orientation makes difficult a thorough theoretical systematization[28]. A widespread classification considers the maturity of a security and distinguishes between long-term and short-term ratings, which works very well for long established rating categories but doesn’t completely allow the integration of other, newer rating forms in this pattern. Ratings can be more successfully categorized into two classes[29]. The first group classifies rating according to the examined financial instrument or type of capital. The respective financial instruments are not linked in any way with issuers of a specific class of business or industry and can originate from a variety of debtors (governmental issuers, local authorities, financial institutions, industrial concerns or utility companies)[30]. To the first group count: ratings for long-term and short-term bonds, ratings of structured finance, ratings for preferred stock and counterparty ratings[31]. On the contrary, the second group differentiates according to the issuer’s class of business. It consists of: ratings for bank deposits, financial strength ratings for banks, financial strength ratings for insurance companies, as well as ratings for investment funds[32].

Besides this classification, there are also some other relevant categories in the world of rating. Of importance is the distinction between issuer rating and issue rating[33]. The issuer rating refers to his overall creditworthiness and capacity to repay its entire financial obligation while the issue rating is an opinion regarding the quality of a certain security. Hence ratings for different securities issued by the same entities can diverge, depending on their collateral and their ranking (first ranked or subordinated)[34]. Other rating forms are: solicited-unsolicited rating[35], debt rating-equity rating, informative rating, medium-sized companies rating[36].

2.4 The Rating Process

In order to examine the impact of changes in rating verdicts, it is of paramount importance to understand how such a rating opinion emerges, what kind of information flows in ratings and how the evaluation takes place. Indeed, the information content of rating is greatly determined by the course of the rating process. This section presents the organization of the rating process, the analysis criteria on which a rating verdict is based and the qualitative and quantitative aspects of rating events.

2.4.1 Organization

The course and organization of a rating process depend on the nature of rating (solicited or unsolicited rating). In the case of unsolicited rating, the analysis process is much shorter, because there is no contact with the evaluated company, therefore only previously released public information is available[37]. Hence, the unsolicited rating quality is usually poorer[38]. The more common solicited rating begins with the issuer’s application. After the initial approach, a team of 4-5 rating analysts is set, and the phase of information gathering starts. This implies company presentations, discussions with the top-management and access to internal, else confidential information, as well as assessment of standard data from annual financial statements or business reports[39]. After a comprehensive analysis of country, sector, company and security risks, a first opinion on the issue emerges. This preliminary rating result is the object of a detailed discussion with the management. The management thus has the chance to present new relevant data or to propose additional guarantees that would improve the rating, before the final result is released. The entire process requires around 90 days[40]. The next two chapters introduce the relevant analysis criteria in the rating process, focusing on the particularities of investigating company risk.

2.4.2 Analysis Criteria of Rating Agencies

The analysis of industrial issuers within the rating process follows a top-down approach. The risk of the country of origin is the first to be analyzed, then an examination of the concerned sector and company is conducted. Finally, the issued security is investigated[41].

illustration not visible in this excerpt

Fig. 1: The Main Stages and Contents of the Rating Process.

Source: Heinke, V.G. 1998, “Bonitätsrisiko und Credit Rating festverzinslicher Wertpapiere“, p. 27.

Fig. 1 introduces the structure and content of the analysis steps leading to a rating. The first level consists of the country risk analysis. The country risk assesses the probability of a political or economical instability of the issuer’s domicile state. One examines the extent to which repayment difficulties can occur and the key country factors that could lead to issuer’s default[42]. In order to carry on this process, both quantitative aspects (real GDP per capita, currency reserves, short-term debt ratio, etc.) as well as qualitative aspects (social environment, innovative potential, political system, internal and external stability) are considered[43]. Rating agencies possess particular expertise in this respect, as country ratings are periodically (and without being solicited) conducted by specialized analysts’ teams[44]. Until now the country rating constituted the upper limit for the rating quality of all issuers from the respective country, but the last years have seen numerous exceptions to that rule. The company rating can meanwhile be above the country rating, when its financial situation, geographical distribution of the business or special collaterals of a parent company justify this[45].

The next step analyzes the cyclical and structural situation of the sector risk. Future demand trends on relevant markets, competition strength of suppliers, market barriers, macroeconomic developments, as well as the products substitution potential, flow into the long term evaluation[46]. Important indicators are: turnover development, capacity utilization, total order quantity and production[47]. The strategic position of the company on the market is a key factor and it is often summed up in a SWOT Matrix. The last step consists of the security investigation, evaluating factors such as: right to cancel, collaterals, guarantees, hypothecary rights, etc. An important attribute of the issued security is a guarantee system that stimulates the punctual payment of debt and interest, as this leads to a rating improvement[48].

A significant stage in the rating process is the analysis of the issuer’s company risk, under consideration of both quantitative and qualitative elements. As this is a core aspect of rating the next chapters will separately discuss this topic.

2.4.3 Qualitative Aspects in the Analysis of Company Risk

The two main compounds of company risk are business risk and financial risk. Both are separately evaluated and receive a partial rating[49].

Business risk is of quantitative nature and the rating criteria considered here are difficult to quantify objectively. Main analyzed aspects are: the sector characteristics, the competition and the management quality[50]. They are in turn determined by growth opportunities, market share, demand cyclicity, product diversification, corporate culture and the impact of the company’s strategy. Especially the accurate evaluation of the management quality plays a very important role, as it determines the structural and financial performance of the company[51]. It can be estimated from data such as personal discussions, skills and qualifications, age, credibility or success record[52]. The information basis for the business risk analysis results from intensive discussions with managers at all levels and evaluations of rating analysts, therefore it is subjective. This feature can constitute both an advantage, because it benefits from the profound market experience of rating specialists[53], as well as a disadvantage, due to its arbitrariness and its lack of transparency[54].

2.4.4 Quantitative Aspects in the Analysis of Company Risk

On the contrary, the financial risk relies on quantifiable data and its information basis consists of released financial information[55]. The five subordinated areas of interest are: financial strategy of the company, profitability, financial statements and balance sheets, the capital structure (especially equity ratio and provisions) and cash flow[56]. The cash flow analysis is extremely relevant in context of rating, as an indicator of the company specific ability to meet its financial obligations. The financial flexibility of the company and its potential to assimilate capital during financial crisis complete this picture. The financial risk can be estimated using key ratios analysis. Time and sector comparison of past financial data reflect the situation of the company in its environment and shape rating opinions. Still, it must be taken into consideration that international sector comparisons are obstructed by different accounting criteria and regulations[57]. Rating agencies release periodically the median of key ratios, such as: EBIT and EBITDA interest coverage, funds from operations, total debt, free operating cash flow and return on capital[58]. The challenge of key ratio analysis is to choose the relevant figures for a specific company and to sensibly aggregate them. Regression analysis, discriminant analysis, artificial intelligence and neuronal nets are some of the employed procedures[59].

[...]


[1] See Peters, A. 2001, pp. 24 - 25.

[2] See Berblinger, J. 1996, p. 23.

[3] See Langenscheidts Taschenwörterbuch Englisch 1990, p. 478.

[4] See Gromer, S. 2000, p. 3.10.

[5] See Wambach, M./Rödl, B. 2001, p. 50, Schneck, O./Everling, O. 2004, p. 87.

[6] See Betsch, O./Groh, A./Lohmann, L. 2000, p. 255.

[7] See Gromer, S. 2000, p. 1.1.0.

[8] See Munsch, M./Weiß, B. 2002, p. 90.

[9] See n.a. 2002, The Economist, the 16th of May.

[10] See Belkaoui, A. 1983, p. 11.

[11] Personal representation, see also the internet sites of Fitch Ratings, Moody’s , S&P.

[12] See Steiner, M./Starbatty, N. 2003, pp. 24 – 26.

[13] See Betsch, O./Groh, A./Lohmann, L. 2000, pp. 255 – 256.

[14] See Wambach, M./Rödl, B. 2001, pp. 71 – 72.

[15] See Schnabel, H. 1996, p. 311.

[16] See Levich, R./Majnoni, G./Reinhart C. M. 2002, p. 1.

[17] See Munch, M./Weiß, B. 2002, p. 24.

[18] See Betsch, O./Groh, A./Lohmann, L. 2000, p. 254.

[19] See Sylla, R. 2002, p. 19.

[20] See Berblinger, J. 1996, p. 26.

[21] See Hickman, W. B. 1958, Atkinson, T.R. 1967.

[22] See Sylla, R. 2002, p. 19.

[23] See Gromer, S. 2000, p. 3.1.0.

[24] See Betsch, O./Groh, A./Lohmann, L. 2000, p. 255.

[25] See Berblinger, J. 1996, p. 29

[26] See Gromer, S. 2000, p. 3.1.0.

[27] See Becker, H./Grunert, P. 2004, p. 97.

[28] See Berblinger, J. 1996, p. 34.

[29] See Betsch, O./Groh, A./Lohmann, L. 2000, p.257.

[30] See Berblinger, J. 1996, p. 34.

[31] See Betsch, O./Groh, A./Lohmann, L. 2000, p. 257.

[32] See ebd., p. 258.

[33] See Wambach, M./Rödl, B. 2001, p. 52.

[34] See Berblinger, J. 1996, p. 33.

[35] Allgemeine Hypothekenbank (AHB), an important player on the “Jumbo Pfandbriefen” market, was very surprised in 1996 by an unsolicited rating regarding pfandbriefs, from S&P. See Hose, Ch. 2002, p. 81.

[36] See Wambach, M./Rödl, B. 2001, p. 53, Munch, M./Weiß, B. 2002, pp. 26ff.

[37] See Heinke, V. G. 1998, p. 31.

[38] This is especially the case in Germany, due to restrictive statutory requirement, while the US extensive publication regulations allow an excellent analysis without management information - see Monro-Davies, R. 1996, pp. 178ff.

[39] See Betsch, O./Groh, A./Lohmann, L. 2000, p. 263.

[40] See Meyer-Papart, W. 1996, p. 117.

[41] See Berblinger, J. 1996, pp. 64-76, Betsch, O./Groh, A./Lohmann, L. 2000, p. 263.

[42] See Hoffmann, P. 1991, pp. 76-90.

[43] See Müller, H. 1996, p. 334.

[44] See Berblinger, J. 1996, p. 64.

[45] See Chambers, W. J. 1997, pp. 9-18.

[46] See Betsch, O./Groh, A./Lohmann, L. 2000, p. 265.

[47] See Müller, H. 1996, pp. 334ff.

[48] See Baum, B. 1987, p. 39.

[49] See Meyer-Papart, W. 1996, p. 120.

[50] See Monro-Davies, R. 1996, p. 184.

[51] See Heinke, V. G. 1998, p. 26.

[52] See Fischer, J./Holzkämper, H. 2003, p. 81.

[53] See Steiner, M. 1992, p. 513.

[54] See Everling, O./Heinke, V. G. 2003, pp. 1759ff .

[55] See Heinke, V. G. 1998, p. 27.

[56] See ebd., p. 29.

[57] See Betsch, O./Groh, A./Lohmann, L. 2000, p. 267.

[58] See Samson, S. B./ Sprinzen, S./Dubois-Pelerin, E. 2004.

[59] See Heinke, V. G. 1998, p. 25.

Details

Pages
73
Year
2006
ISBN (eBook)
9783638529648
ISBN (Book)
9783638730372
File size
862 KB
Language
English
Catalog Number
v58888
Institution / College
Technical University of Darmstadt – Institut für Betriebswirtschaftslehre
Grade
1,3
Tags
Influence Rating Changes Bonds

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Title: The Influence of Rating Changes on Bonds