Year of Graduation
Role of Reputation Factors in the Estimation of Credit Rating Change Impact on Share Price Dynamics (at the U.S. Market)
This project is aimed to analyze the role of reputational factors in share price dynamics under credit rating downgrade circumstances. The core role of reputational risk attracted company’s top-management attention after the global financial crises in 2008 as it became clear that this risk is highly important to include into company’s business strategy. There is a great amount of papers analyzed the interconnections between reputation and CEO behavior while there is a lack of researches of credit and reputation risks relationship despite the fact of it importance for diversification and risk optimization. This project is aimed to take first steps to analyze this particular relationship. To reach this aim the financial daily data of 193 American companies from 2008 to 2018 has been collected and 255 events of credit rating downgrades have been selected for this research in order to find out the reputational factor impact in financial market reaction to the negative news. The event study and logit regression methodology have been used in this research as a classical economentic approaches for such studies. The core result of the whole project consists in fact that company size, leverage, age and beta are the main reputational factors that provided a significant effect on company reputation losses under credit rating downgrade. Also, it was shown that at least one third of all losses under credit rating downgrade circumstance accounted for reputation losses.