SOVEREIGN CREDIT RATING AND STOCK MARKET CAPITALIZATION IN CENTRAL AND EASTERN EUROPE, 1996 - 2010

Sovereign rating influences the corporate credit rating and therefore, the value of corporations on the capital market. The objective of this paper is to verify the premise according to which the degradation of sovereign rating draws in the diminution of stock market capitalization, and its improvement generates the increase of stock market capitalization. In this respect, there has been drawn up a panel type regressive model to quantify the rating impact on the stock market capitalization in Central and Eastern Europe for the period 1996 - 2010. The empirical analysis validates the previous premise.