In 2001, government guarantees for savings banks in Germany were removed following a lawsuit. We use this natural experiment to examine the effect of government guarantees on bank risk taking. The results suggest that banks whose government guarantee was removed reduced credit risk by cutting...

This paper investigates whether the stock market reacts to unsolicited ratings for a sample of firms rated by Samp;P between January 1996 and December 2005. We first analyze the stock market reaction to the assignment of an initial unsolicited rating. We find evidence that this reaction is...

Over the last four years, more than 50,000 German bank employees lost their jobs and aggregate debt write-downs in the German banking market added up to 100 billion euros. Yet, these four problem-stricken years witnessed one of the biggest success stories in German banking, namely the rise of...

This paper compares the accuracy of credit ratings of Moody's and Standardamp;Poor's. Based on 11,428 issuer ratings and 350 defaults in several datasets from 1999 to 2003 a slight advantage for the rating system of Moody's is detected. Compared to former research the robustness of the results...

This paper examines intraday stock price and trading volume effects caused by ad hoc disclosures in Germany. The evidence suggests that the stock prices react within 30 minutes after the ad hoc disclosures. The adjustment of the trading volume needs even more time. We find no evidence for...

This paper assesses biases in credit ratings and lead-lag relationships for near-to-default issuers with multiple ratings by Moody's and Samp;P. Based on defaults from 1997 to 2004, we find evidence that Moody's seems to adjust its ratings to increasing default risk in a timelier manner than...

We reassess the recent finding that no established portfolio strategy outperforms the naively diversified portfolio, 1/N, by developing a constrained minimum-variance portfolio strategy on a shrinkage theory based framework. Our results show that our constrained minimum-variance portfolio yields...

We analyze whether different intensities of country ties to Europe affected the assignment of sovereign credit ratings during the Eurozone sovereign crisis. We find that Fitch, the rating agency among the “Big Three” with significantly stronger ties to Europe, was more reluctant than its two...

This paper examines why unsolicited ratings tend to be lower than solicited ratings. Both self-selection among issuers and strategic conservatism of rating agencies may be reasonable explanations. Analyses of default incidences of non-U.S. borrowers between January 1996 and December 2006 show...

Rating downgrades are known to make subsequent downgrades more likely. We analyze the impact of this ldquo;downward momentumrdquo; on credit portfolio risk and bond portfolio management. Using Standardamp;Poor's ratings from 1996 to 2005, we apply a novel approach to estimate a transition matrix...