Credit Rating Changes and Equity-Market Reactions: Evidence from S&P 500 Firms

This dissertation examines whether credit rating upgrades and downgrades generate abnormal stock returns around public announcement dates for S&P 500 firms. Using an event-study methodology, expected returns are estimated through a market model and abnormal returns are aggregated across pre-announcement, announcement, and post announcement windows. The analysis separates upgrades and downgrades and further examines rating grade, notch-change magnitude, crossover events, rating agency effects, and announcement sequencing. The results provide weak and uneven evidence of abnormal returns. Downgrades show some negative pre-announcement effects, especially in short windows and among investment-grade firms, but these are not consistent across all windows. Upgrade effects are mixed and sometimes negative, while the immediate announcement window shows no strong reaction for either group. Overall, the findings suggest that rating announcements for large, highly followed firms have limited incremental equity-market impact and are more consistent with partial pre-announcement adjustment than with strong announcement-date price reactions.