محتوای اطلاعات رتبه بندی اعتباری استرالیا: مقایسه بین موسسات رتبه بندی اعتباری مبتنی بر اشتراکی و غیراشتراکی

We classify credit rating agencies into two groups: subscribing and non-subscribing. Investors can access (non-subscribing) credit reports released to the public for no charge, or investors can subscribe to the fee-paying (subscribing) credit reports from agencies. Our results suggest that the information content of non-subscribing credit agencies is very low, whereas positive excess returns exist up to eight months after the announcement of credit upgrades from the subscription-only agencies. We support the hypothesis proposed in Grossman and Stiglitz [Grossman, S.J., Stiglitz, J.E., 1976. Information and competitive price systems. The American Economic Review 66, 246–253; Grossman, S.J., Stiglitz, J.E., 1980. On the impossibility of informationally efficient markets. The American Economic Review 70, 393–408]. Investors who spend resources on information acquisition should receive compensation for their information advantage, or there would be no incentive for such activity.

The aim of this paper is to analyse the short and long-run stock returns before and after the announcement of Australian credit rating changes. There are two alternative views on the information content of credit rating changes. One view is that credit rating agencies use publicly available information to analyse the financial fundamentals of rated firms. If the capital market is semi-strong form efficient, then there is no information in credit rating changes because share prices have already incorporated the information on which the change was based. An alternative view is that credit agencies have private information via their access to confidential information used in their debt market ratings. Private information releases might cause share price revisions. However, some credit rating agencies disseminate their credit reports in the form of press releases or via the electronic media, and act as low cost providers of additional information on the rated firms to the capital market. This study investigates whether the information content of credit rating changes of subscription-based credit rating agencies differs from that where the ratings are available free of charge. The motivation for undertaking this research is to assess whether a credit rating change is a leading or lagging indicator of share market returns. If a credit rating change is a lagging indicator, the pre-announcement equity returns should be abnormally high (low) for credit upgrades (downgrades) and there will be normal equity returns after the announcement. If a credit rating change is a leading indicator, credit rating changes will make a significant impact on issuers’ stock prices in the announcement period. For those firms that have been downgraded by credit rating agencies, negative abnormal returns should be expected on the announcement because it is difficult for downgraded firms to roll over their existing short-term debts. High borrowing costs will cause the operating and financial positions of the rated firms to deteriorate even though credit rating agencies advise rated firms on how to improve their financial fundamentals; they will take a long period of time to work through the negative effects of credit downgrades. For credit upgrades, normal or above normal equity returns are expected because low-rated firms will continue to improve their operating performances whereas high-rated firms will sustain their current performance to maintain their current credit ratings. Hence, an asymmetric pattern of stock returns between downgrades and upgrades is expected. There are two types of credit rating agencies. The first category consists of credit rating agencies such as Moody's Investors Service and Standard & Poor's, which release their credit reports in the form of a press release or via the electronic media; these are classified as non-subscribing credit rating agencies. In contrast, subscribing credit rating agencies such as the Corporate Scorecard Group deliver their credit reports to fee-paying customers. This paper uses credit data from both sources to examine whether subscribers benefit from the products or services provided by subscribing credit rating agencies, using buy-and-hold abnormal returns (BHARs) after release of credit rating changes to subscribers. Previous studies only focus on credit rating changes assigned by the non-subscribing credit rating agencies. For instance, Pinches and Singleton (1978) find abnormally high (low) stock returns before the announcement of credit upgrades (downgrades) and normal equity returns after credit rating revisions. They claim that the market has anticipated the information content of credit rating changes and has discounted the rated firms’ stock prices. The results of this study provide support for their findings for the non-subscribing agency tests. In the period between September 1986 and June 2004, 104 observations of publicly listed Australian firms which are subjected to Moody's credit rating changes are investigated. The pre- and post-announcement BHARs based on the All Ordinaries Accumulation Index and industry and size matched control firm approach are calculated and there is no evidence of excess long-run equity returns after Moody's credit rating revisions. Therefore, both credit upgrades and credit downgrades are lagging indicators and investors cannot develop a profitable trading strategy based on the information content of publicly released credit rating changes. The results of this paper contrast with recent US studies which find abnormally low equity returns after the announcement of credit downgrades, whereas there is no evidence of abnormal equity returns for credit upgrades. This paper suggests that investors can possibly use ‘possible downgrade’ credit ratings to predict future stock price movements. The 3-day post-announcement BHARs are negative and statistically significant at the 5% level based on the market index calculations whereas the 3-month, 6-month and 1-year post-announcement BHARs are negative and statistically significant at 5% based on the industry and size matched control firm approach. However, there is no evidence of excess positive returns after the announcement of possible upgrades. Additionally, the samples are divided into investment and speculative categories, the results indicate that most of the negative abnormal returns found in the pre-announcement periods are contributed by credit downgrades in the speculative grade category. The results of this paper are consistent with the findings in Hand et al. (1992) and Goh and Ederington (1999). For the subscription-based credit rating agencies, a comprehensive database is provided from the Corporate Scorecard Group. In the period June 1991 to June 1997, the Corporate Scorecard Group evaluated the operating performance of 512 publicly listed companies and provided a total of 867 credit rating changes. There are 523 credit upgrades and 344 credit downgrades. The post-announcement monthly BHARs based on industry indices and industry and size matched control firm approach are calculated. This paper finds that there is evidence of excess positive abnormal returns up to eight months after the announcement of credit upgrades based on the industry indices whereas there is no evidence of abnormal returns after the announcement of credit downgrades. This study obtains similar results when the control firm approach is used for the post-announcement period. Due to the divergence of the results for the credit upgrades in the pre-announcement periods, a final conclusion as to whether a credit upgrade is a leading or lagging indicator cannot be drawn. The results of this paper are subject to benchmark problems which are frequently found in the long-run event studies. However, a credit downgrade is found to be a lagging indicator, while a credit upgrade has a predictive power in future stock price performance. Additional tests reveal that most of the excess positive (negative) abnormal returns for the full sample of credit upgrades (credit downgrades) are contributed by the credit upgrades (credit downgrades) in the speculative grade category. This paper supports and confirms the hypothesis proposed in Grossman and Stiglitz, 1976 and Grossman and Stiglitz, 1980 who argue that the market must be sufficiently noisy to allow informed investors to recover the costs of their information search. Informed investors will buy securities which are undervalued or sell securities which are overvalued. In such a process, information is transferred from informed traders to uninformed traders. Those who spend money in acquiring information should receive compensation. Therefore, informed traders should be expected to obtain higher equity returns than uninformed traders. There is ‘no free lunch’ in the market for publicly available credit announcements; however, subscribers to private rating agencies can benefit potentially from the services provided by these agencies. Another possible explanation for these observed differences in returns is that the sample in each group is different in composition. For the Moody's Database, most of the observations are blue-chip firms, whereas for the Corporate Scorecard's Database, most of the observations are small and medium size firms. Hsueh and Liu (1992) indicate that the information content of bond rating changes is higher for those stocks with less information in the capital market. Since large firms attract more attention from market participants, more information should be available in the market. If the market is semi-strong form efficient, the rated firms’ stock prices will have already anticipated the information content of credit rating changes and therefore no excess equity return should be expected for the non-subscribing credit rating agencies. On the other hand, small firms will have less information available in the market. Their current market prices may not be fully reflective of the operating performance of the rated firms. When the subscription-based credit rating agencies release their credit reports to subscribers, they will benefit from this inside information. By purchasing those stocks which are below intrinsic value, subscribers can earn the extra profits. Because there is a time lag between subscribers and non-subscribers in accessing credit information, excess equity returns should be expected for the subscription-based credit rating agencies. The abnormal returns found in this study are consistent with an information asymmetry of credit information between the small and large firms. An important contribution of this paper is that none of the previous studies have found positive excess equity returns following credit upgrades. The majority of recent studies have found abnormal negative returns after the announcement of credit downgrades. If short-selling is not a common practice for market participants, they cannot realize a profit from the information content of credit downgrades. This paper confirms that the information added by the subscription-based credit rating agencies benefits subscribers who can earn extra profits by purchasing stock in those firms conditional on a credit upgrade. It is akin to having insider information. The remainder of this paper is organized as follows: the literature review is presented in Section 2. Data selection and methodologies are described in Section 3. Section 4 presents the results of credit rating changes for both the Moody's and the Corporate Scorecard Group's databases. A conclusion is offered in Section 5.

The aim of this paper is to analyse the short-term and long-term stock returns after the announcement of credit rating changes and to identify whether a credit rating is a leading or lagging indicator. This paper classifies credit rating agencies into two groups: subscribing and non-subscribing. Investors can access the credit reports of non-subscribing agencies (as these are released to the public in the form of press release or via the electronic media) gratis, or investors can subscribe to credit reports from the subscription-based credit rating agencies that will charge for their products and services. The results for this paper suggest that subscribers benefit by developing trading strategies based on credit reports provided by the subscribing credit rating agencies, whereas there is no evidence of abnormal equity returns after the announcement of credit reports from the non-subscribing credit rating agencies. To conclude, there is ‘no free lunch’ in the market irrespective of whether the credit rating is a leading or lagging indicator nor does it depend on the type of credit rating agencies providing the services. This paper supports and confirms the hypothesis proposed in Grossman and Stiglitz, 1976 and Grossman and Stiglitz, 1980. The capital market is shown to be sufficiently noisy to allow those who invest in costly information acquisition to at least recover these costs. The current market price does not always fully reflect the intrinsic values of securities. Informed investors can buy the securities which are undervalued and sell securities which are overvalued. Therefore, informed investors are able to earn excess returns to compensate their cost of acquiring information. Another possible explanation for this phenomenon is that the sample in the Moody's database consists of large firms whereas the sample in the Corporate Scorecard database is mainly small firms. Large firms usually have more publicly available information in the market. If the market is semi-strong efficient, the information of credit rating changes should be reflected in the rated firms’ current stock prices. Since small firms have less publicly available information, the current stock prices may not fully reflect the current operating performance of the rated firms. When subscription-based credit rating agencies release their credit reports to their clients, more information is injected into the market. The mis-pricing of rated firms’ stock prices is corrected by subscribers whose investment actions correct the market value of firms to intrinsic value. The divergence of results between non-subscribing and subscription-only credit rating agencies is possibly due to information asymmetry between small and large firms. Future research could examine whether other credit indicators such as Economic Value-Added (EVA) and earning announcements will be compatible with the credit rating revisions. Another direction for future research is whether credit indicators such as EVA are more reliable than stock market information (e.g. stock price, trading volume, return volatility and bid-ask spreads) in predicting corporate failure.