This study analyzes the effects of six different credit rating announcements on systematic and idiosyncratic risk in Spanish stocks from 1988 to 2010. We analyze announcement by the main rating agencies: Moody's, Standard & Poor's and Fitch. We apply an extension of the event study in a CAPM model. We find effects in both kinds of risk, indicating that rating agencies provide new information to the market. Rating actions that imply an improvement in credit quality cause lower systematic and idiosyncratic risk, with lower effect in beta risk. Conversely, ratings announcements that imply credit quality deterioration cause a rebalance in both types of risk, with higher beta risk being joined with lower diversifiable risk. Moreover, the risk responses depend on the characteristics of the announcement, the issuer and the economic environment.
Abad, P., & Robles, M. D. (2015). ¿reflejan los cambios de rating de la deuda variaciones en el riesgo de los emisores? Revista Europea de Direccion y Economia de La Empresa, 24(1), 47–60. https://doi.org/10.1016/j.redee.2014.04.001