Equity short selling and bond rating downgrades

被引:41
作者
Henry, Tyler R. [1 ]
Kisgen, Darren J. [2 ]
Wu, Juan [3 ]
机构
[1] Miami Univ, Farmer Sch Business, Oxford, OH 45056 USA
[2] Boston Coll, Carroll Sch Management, Chestnut Hill, MA 02467 USA
[3] Univ Georgia, Terry Coll Business, Athens, GA 30602 USA
关键词
Credit ratings; Default risk; Short selling; SHORT-SELLERS; SHORT-SALES; INFORMATIONAL EFFICIENCY; PRICE DISCOVERY; STOCK RETURNS; MARKET; CONSTRAINTS; LIQUIDITY; COSTS; FIRMS;
D O I
10.1016/j.jfi.2014.02.005
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
摘要
We examine whether short sellers identify firms that have significant changes in default likelihoods and credit rating downgrades. In the month before a rating downgrade, equity short interest is 40% higher than one year prior. Short sellers predict changes in default probabilities that lead to downgrades by focusing on firms with inaccurate or biased ratings. This strategy is profitable for short sellers primarily since downgrades are associated with significantly negative equity returns. Short sellers also facilitate price discovery by reducing abnormal stock returns following downgrades and by leading bond yield spreads. (C) 2014 Elsevier Inc. All rights reserved.
引用
收藏
页码:89 / 111
页数:23
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