Doctoral thesis of philosophy corporate bond rating changes, cross market information transfer and the spillover effect in the united kingdom

Corporate Bond Rating Changes, Cross-Market Information Transfer and the Spillover Effect in the United Kingdom A thesis submitted in fulfilment of the requirements for the degree of Doctor of Philosophy Hasniza Mohd Taib BBA (Hons) Finance, MBA (Finance) School of Economics, Finance and Marketing RMIT University July 2010 DECLARATION I certify that except where due acknowledgement has been made, the work is that of the author alone; the work has not been submitted previously, in whole or in part, to qualify for any other academic award; the content of the thesis is the result of work which has been carried out since the official commencement date of the approved research program; and any editorial work, paid or unpaid, carried out by a third party is acknowledged The following papers were written as part of the research of this thesis: Mohd Taib, H., Di Iorio, A., Hallahan, T & Bissoondoyal-Bheenick, E (2009), ‘The Share Price Reaction during Corporate Bond Rating Revision’, paper presented at the Annual London Conference on "Money, Economy and Management", London, 9-10 July 2009 (The above paper received the best paper award for finance category during the conference) Mohd Taib, H., Di Iorio, A., Hallahan, T & Bissoondoyal-Bheenick, E (2009), ‘Do Announcements of Corporate Bond Rating Revision Matter?’, paper presented at 22nd Australasian Finance and Banking Conference, Sydney, 16-18 December 2009 Mohd Taib, H., Di Iorio, A., Hallahan, T & Bissoondoyal-Bheenick, E (2010), ‘CrossMarket Information Transfer: Do Announcements of Corporate Bond Rating Revisions Contain News to Shareholder?’, paper presented at the European Financial Management Association 2010 Annual Conference, Denmark, 23-26 June 2010 Mohd Taib, H., Di Iorio, A., Hallahan, T & Bissoondoyal-Bheenick, E (2010), ‘Corporate Bond Rating Changes and Their Impact on Stock Prices: A Comparison Study of Return Generating Models’, paper presented at the European Financial Management Association 2010 Annual Conference, Denmark, 23-26 June 2010 Hasniza Mohd Taib ii ACKNOWLEDGEMENTS In the Name of Allah, the Most Gracious the Most Merciful First and foremost, I would like to express my gratitude to the Ministry of Higher Education, Malaysia and the Universiti Utara Malaysia for giving me the opportunity to further my education at RMIT University My sincere appreciation to my supervisors, Amalia Di Iorio and Terry Hallahan; and also to my consultant, Emawtee Bissoondoyal-Bheenick for the love, support, guidance, advice and knowledge they have given me Thank you to my editor, Julia Farrell and all the anonymous reviewers of the various papers which have been produced as part of this research The valuable comments given significantly improved the quality of the thesis I am also grateful to the academic staff of the Department of Economics, Finance and Marketing, RMIT University especially Heather Mitchell, Marie-Anne Cam and Tim Fry for their willingness to share the knowledge Thank you to my colleague, Robyn Ward for being there with me in one of the most critical times of my study period Thank you to all my friends in Australia and Malaysia for motivating me and sustaining me during my study I have been blessed by Allah Almighty for giving me so many friends who always make my life so colourful Friends are very important to me and I really appreciate and love each one of them Though I did not specifically list the name of my friends here but they are permanently in my heart-in my own hall of fame Special thanks go to my housemates who always supported me and encouraged me to achieve my goals My deepest love to my mother, Hajah Rodziah Yatim who believes in me and never fails to pray everyday for my success My sincere thanks to my siblings who support my dreams Above all, thank you to Allah Almighty for guiding me and granting me so many good things in life Alhamdulillah iii TABLE OF CONTENTS DECLARATION ii ACKNOWLEDGEMENTS iii TABLE OF CONTENTS iv LIST OF TABLES viii LIST OF FIGURES x ABSTRACT xi Chapter INTRODUCTION 1.1 Introduction 1.1.1 Brief Overview of a Corporate Bond 1.1.2 Credit Rating Agencies: Moody’s and S&P .2 1.2 Contributions of the Thesis 1.3 Motivation for the Thesis 1.4 Objectives of the Study 1.5 Thesis Outline Chapter LITERATURE REVIEW .9 2.1 Introduction 2.2 Information Value and Bond Rating 2.2.1 Bond Rating and Share Price Reaction .10 2.2.2 Bond Rating Changes and Bond Price Reaction 15 2.3 Rating Agencies and Bond Rating Announcements 16 2.4 Hypotheses on the Information of Bond Rating Changes Announcements .18 2.4.1 Efficient Market Hypothesis .18 2.4.2 Private Information Hypothesis 19 2.4.3 Wealth Redistribution Hypothesis 20 2.5 Other Effects caused by Rating Changes Announcements 21 2.5.1 The Intra-Industry, Contagion and Competitive Effects 21 2.5.2 The Spillover Effect 24 2.6 Event Study 25 2.6.1 Event Study Research Design 25 2.6.2 Models for Measuring Normal Return .26 2.6.3 Criticism of the CAPM and Other Return-Generating Models 28 2.7 Parametric Test vs Nonparametric Test 31 2.8 Chapter Summary 34 iv Chapter 35 MARKET REACTION DURING THE CHANGES OF BOND RATING ANNOUNCEMENTS: THE CASE OF UK LOCAL BOND ISSUER 35 3.1 Introduction 35 3.2 Literature Review 36 3.3 Data And Modelling Framework .38 3.3.1 Data 38 3.3.2 Modelling Framework 45 3.4 Empirical Results .50 3.4.1 Moody’s vs S&P: Analysis of Daily Observations 50 3.4.2 Moody’s vs S&P: Analysis of Market Reactions Based on Subperiods 56 3.4.3 Investment Grade vs Speculative Grade 59 3.5 Conclusion 66 Appendix 3.1 67 Appendix 3.2 73 Chapter 77 NONPARAMETRIC RANK TESTS VS PARAMETRIC t-TESTs: THE CASE OF UK CORPORATE BOND RATING REVISION 77 4.1 Introduction 77 4.2 Literature Review 79 Data and Modelling Framework .79 4.3.1 Data 79 4.3.2 Modelling Framework 80 4.4 Empirical Results .86 4.4.1 Market Reaction to Rating Changes Announcements 86 4.4.2 Investment Grade vs Speculative Grade 94 4.4.3 Results of Cross-Sectional Regression Analysis 102 4.5 Conclusion .108 Appendix 4.1 110 Appendix 4.2 116 Chapter 117 THE COMPARISON BETWEEN RETURN-GENERATING MODELS: THE IMPACT ON THE SHARE RETURN DURING CORPORATE BOND RATING REVISION .117 5.1 Introduction 117 5.2 Literature Review 119 v 5.3 Data and Modelling Framework 119 5.3.1 Data 119 5.3.2 Modelling Framework 120 5.4 Empirical Results 124 5.4.1 Comparisons of Assessment of Daily Reactions of Share Price between ReturnGenerating Models 124 5.4.2 Return-Generating Models: Investment Bond and Speculative Bond 129 5.5 Conclusion .139 Chapter 141 DO AUSTRALIAN CORPORATE BOND RATING CHANGES ANNOUNCEMENTS MATTER? 141 6.1 Introduction 141 6.2 Literature Review 142 6.3 Data and Modelling Framework 144 6.3.1 Data 144 3.2 Modelling Framework .150 6.4 Empirical Results 150 6.4.1 Daily Observations 150 6.4.2 Market Reaction and Subperiod Observation during Rating Changes .156 6.4.3 The Reaction to Major Rating Changes 160 6.5 Conclusion .167 Appendix 6.1 169 Chapter 172 CORPORATE BOND RATING CHANGES AND THE CROSS-MARKET SPILLOVER EFFECT 172 7.1 Introduction 172 7.2 Literature Review 174 7.3 Data and Modelling Framework 176 7.3.1 Data 176 7.3.2 Modelling Framework 185 7.4 Empirical Results 185 7.4.1 Daily Observations and the Spillover Effects on Foreign Issuers 185 7.4.2 Spillover Effect and Subperiod Analysis 196 7.5 Conclusion .201 Appendix 7.1 202 Appendix 7.2 209 vi Appendix 7.3 212 Chapter 214 CONCLUSION .214 8.1 Introduction 214 8.2 Overview and Conclusions 215 8.3 Limitations of Study 218 8.4 Directions for further research 219 BIBLIOGRAPHY 221 vii LIST OF TABLES Table 1.1 Long-term issues credit rating by S&P and Moody’s Table 2.1 Steps in event study analysis 26 Table 3.1 Rating changes announcements by S&P and Moody’s 40 Table 3.2 Numbers of upgrade and downgrade announcements by S&P and Moody’s 40 Table 3.3 Upgrade and downgrade announcements according to industry 41 Table 3.4 Rating change matrix based on announcement by S&P 42 Table 3.5 Bond rating change matrix based on announcement by Moody’s .43 Table 3.6 Proportion of bonds in terms of grade after rating changes 44 Table 3.7 Market reaction to the announcements of rating upgrades in the UK 53 Table 3.8 Market reaction to the announcements of rating downgrades in the UK .54 Table 3.9 Market reactions to corporate bond rating revision .58 Table 3.10 Investment vs speculative grade: market reactions to rating upgrades .62 Table 3.11 Investment vs speculative grade: market reactions to rating downgrades 63 Table 4.1 Descriptive statistics for abnormal returns 80 Table 4.2 Parametric and non-parametric test: market reaction during rating upgrades 89 Table 4.3 Subperiod observation: upgrade announcements 90 Table 4.4 Parametric and non-parametric test: market reaction during rating downgrades .93 Table 4.5 Subperiod observation: downgrade announcements 94 Table 4.6 Investment vs speculative grade: upgrade announcements .100 Table 4.7 Investment vs speculative grade: downgrade announcements 101 Table 4.9 Regression results of average returns (ARs) and cumulative average returns (CARs) during the rating upgrades (N=77) 106 Table 4.10 Regression results of average returns (ARs) and cumulative average returns (CARs) during the rating downgrades (N=207) 107 Table 5.1 Number of rating announcements based on bond grade in the UK 120 Table 5.2 Market reactions during UK rating upgrades announcements 127 Table 5.3 Market reactions during UK rating downgrades 128 Table 5.4 Market reactions for bonds that remain as investment bonds: rating upgrades 131 Table 5.5 Market reactions for bonds that remain as speculative bonds: rating upgrades 132 Table 5.6 Market reactions for bonds that move from speculative to investment grade: rating upgrades .133 Table 5.7 Market reactions for bonds that remain as investment bonds: rating downgrades 136 Table 5.8 Market reactions for bonds that remain as speculative bonds: rating downgrades 137 Table 5.9 Market reactions for bonds that drop from investment to speculative grade: rating downgrades 138 viii Table 6.1 Rating changes announcements of Australian corporate bond 144 Table 6.2 Descriptive statistics for Australian abnormal returns .145 Table 6.3 Australian bond upgrades and downgrades according to year 146 Table 6.4 Australian bond upgrades and downgrades according to industry 146 Table 6.5 Australian bond rating change matrix based on announcements by S&P 147 Table 6.6 Australian bond rating change matrix based on announcement by Moody’s 148 Table 6.7 Proportion of bonds according to grade after rating changes 149 Table 6.8 Market reaction of UK and Australian corporate bonds: rating upgrades 154 Table 6.9 Market reaction of UK and Australian corporate bonds: rating downgrades 155 Table 6.10 Share price reaction during corporate bond rating changes: Australia vs the UK 159 Table 6.11 Investment grade vs speculative grade: rating upgrades 163 Table 6.12 Investment bond vs speculative bond: rating downgrades 164 Table 6.13 Summary of market reaction during rating changes in the UK and Australia 168 Table 7.1 Bond rating changes announced by S&P issued by foreign companies in the UK 177 Table 7.2 Descriptive statistics for the abnormal returns of foreign issuers in the UK 178 Table 7.3 Proportion of bonds according to grade issued by foreign companies in the UK 179 Table 7.4 Corporate bond rating change matrix for bonds issued by American, European and AsiaPacific companies in the UK 180 Table 7.5 Number of upgrade and downgrade announcements by S&P for corporate bonds issued by foreign companies in the UK according to industry 181 Table 7.6 Number of rating changes announcements based on the country of origin of the foreign companies that issued corporate bonds in the UK from 1997–2006 181 Table 7.7 Market proxies based on country .182 Table 7.8 Definition of indices 183 Table 7.9 Market reaction during rating changes for bond issued by US companies in the UK .189 Table 7.10 Market Reaction during rating changes for bonds issued by European companies in the UK 190 Table 7.11 Market reaction during rating changes for bonds issued by Asia-Pacific companies in the UK 191 Table 7.12 Market reaction during rating changes for bonds issued in the UK by companies from the US, Europe and the Asia-Pacific 194 Table 7.13 Subperiod phases 196 Table 7.14 Market reactions during corporate bond upgrade announcements 199 Table 7.15 Market reactions during corporate bond downgrade announcements 200 ix LIST OF FIGURES Figure 3.1 Return movement for FTSE All Share and MSCI Europe Index .45 Figure 3.2 Market reactions to the upgrade announcements (proxy: FTSE All Share) .55 Figure 3.3 Market reactions to the upgrade announcements (proxy: MSCI Europe) 55 Figure 3.2 Market reaction to the downgrade announcements (proxy: FTSE All Share) 55 Figure 3.3 Market reaction to the downgrade announcements (proxy: MSCI Europe) .56 Figure 3.6 Investment grade vs speculative grade: market reaction based on S&P downgrade announcements (market proxy: FTSE All Share) 64 Figure 3.7 Investment grade vs speculative grade: market reaction based on S&P downgrade announcements (market proxy: MSCI Europe Index) 64 Figure 3.8 Investment grade vs speculative grade: market reaction based on Moody’s downgrade announcements (market proxy: FTSE All Share) 64 Figure 3.9 Investment grade vs speculative grade: market reaction based on Moody’s downgrade announcements (market proxy: MSCI Europe Index) 65 Figure 6.1 Return movements for ASX 200 from 1997 to 2006 149 Figure 6.2 Australian market reactions during the upgrade announcements .156 Figure 6.3 Australian market reactions during the downgrade announcements 156 Figure 6.4 Investment grade vs speculative grade: market reactions based on S&P upgrade announcements 165 Figure 6.5 Investment grade vs speculative grade: market reaction based on Moody’s upgrade announcements 165 Figure 6.6 Investment grade vs speculative grade: market reaction based on S&P downgrade announcements 166 Figure 6.7 Investment grade vs speculative grade: market reaction based on Moody’s downgrade announcements 166 Figure 7.1 Market reaction during rating upgrades in the UK for bonds issued by all foreign companies (market proxy: MSCI World Index ) .195 Figure 7.2 Market reaction during rating downgrades in the UK for bonds issued by all foreign companies (market proxy: MSCI World Index) 195 x Chapter CONCLUSION 8.1 Introduction This thesis examined the information value of announcements of corporate bond rating changes It focused on the impact of rating changes announcements on share prices from January 1997 to 31 December 2006, primarily in the UK The thesis makes six contributions to the existing field of research The main contribution of the thesis is in providing evidence about the influence of the private information contained in rating changes announcements This was demonstrated by thoroughly investigating the corporate bond rating changes in the UK It was found that downgrade announcements, unlike upgrade announcements, trigger negative market reactions in the UK This outcome supports the private information hypothesis Second, the thesis presented a comparative analysis of the parametric t-test and the nonparametric test in calculating excess share returns during bond rating changes in the UK Both the standardised cross-sectional t-test and the rank test revealed that significant negative reactions were observed in response to the rating downgrade announcements Third, this study contributes to the literature by analysing the influence of both companyunique characteristics and bond characteristics on the abnormal returns of shares during the upgrade and downgrade announcements in the UK Factors such as the rating agency, preevent returns and changes within the rating class were found to be significant in influencing the abnormal return during bond rating downgrades Fourth, this research undertook a comparative analysis of alternative return-generating models: the quadratic model, the downside model and the higher-order downside model The quadratic model and the downside model generally gave similar results as the market model However, the higher-order downside model did not perform at the same level as the other models 214 Fifth, this thesis presented a comparative analysis of two-developed markets, Australia and the UK Unlike the UK market, significant market reaction to the upgrade and downgrade announcements was identified in the Australian context suggesting that the capital market in Australia is less efficient than that of the UK Lastly, the thesis examined the impact of news transmission across markets resulting from announcements of rating changes for bonds issued by foreign issuers in the UK The European issuers were found to be affected during the upgrade and downgrade announcements Issuers from other countries experienced a spillover effect during the bond downgrade 8.2 Overview and Conclusions This thesis presented five studies Overall, all studies showed that there were significant negative share price reactions to the announcements of bond downgrade in the UK This supported the private information hypothesis However, upgrade announcements did not cause any significant share price reaction The first study investigated broadly the information value of corporate bond rating changes issued by local issuers in the UK The final sample of announcements consisted of 299 rating changes as announced by S&P and Moody’s from January 1997 to December 2006 Based on the subperiod analysis, significant negative share price reactions were observed during the downgrade announcements However, no significant reaction was observed for the upgrade announcements in the UK The full sample of rating changes announcements was then divided according to bond grade The findings revealed that the investment grade bonds triggered negative reactions during the downgrade announcements Limited evidence was also found for bonds that remain as speculative grade, based on Moody’s announcements Similar to previous studies conducted in the US, such as those of Hand, Holthausen and Leftwich (1992) and Goh and Ederington (1993), there is some evidence to suggest that the negative share price reaction was greater for speculative grade bonds than for investment grade bonds during the downgrade announcements in the UK No conclusion could be drawn for bonds that moved from the speculative grade to the investment grade or dropped from the investment grade to the speculative grade due to the small number of observations Furthermore, Moody’s performed at the same level as S&P in terms of causing market reactions when upgrades and downgrades were announced 215 The second study employed the nonparametric rank test based on the work of Corrado (1989) and Corrado and Truong (2008) to examine share price reactions when rating upgrades and downgrades were announced The performance of the rank test was then compared to the standardised cross-sectional t-test proposed by Boehmer, Musumeci and Poulsen (1991) The rank test and the t-test both showed that there was no significant reaction when an upgrade was announced by the rating agencies However, there was support for the private information hypothesis as the market reacted negatively to the downgrade announcements The standardised cross-sectional t-test outperformed the nonparametric rank tests In fact, when investigating the impact on the bonds that remained as investment grade, the parametric t-test also outperformed the nonparametric rank test The second study employed multivariate regression analysis to investigate factors that may influence the abnormal return during the rating changes announcements Bond characteristics such as rating agencies, pre-event return and changes within the rating class were found to be significant in influencing the abnormal return during the rating changes announcements The pre-event return had a significant negative relationship with the abnormal return on the day of the downgrade announcements (day 0), which indicated that market participants did not have any prior knowledge of the surprising news of the rating downgrade Bonds that experienced changes within the rating class had a positive relationship with the abnormal return when the downgrades were announced This meant that if the downgrade involved rating changes within the class (i.e BBB to BBB-), the negative abnormal return during the downgrade would be less severe The third study explored alternative return-generating models for measuring the abnormal share price during rating changes announcements in the UK The quadratic model, the downside model, and the higher-order downside model were employed in this study and were compared to the market model There was consistency in terms of the sign of AARs across the return-generating models during both upgrade and downgrade announcements by rating agencies in the UK There was insufficient evidence to support the private information hypothesis during upgrade announcements using all the models Hence, no conclusion on the performance of the return-generating models could be derived in relation to rating upgrades During the downgrade announcements, the higher-order downside model was not found to perform at the same level as the other models This indicates that even the simplest model like the market model is adequate to estimate the abnormal return of share prices 216 The fourth study investigated Australian share price reactions based on 107 rating changes by S&P and Moody’s from January 1997 to December 2006 This study also included a comparative analysis between Australia and the UK Unlike the case of the UK, significant support for the private information hypothesis was found for both rating upgrades and downgrades in Australia In fact, significant share price reactions were observed for bonds that remained as investment grade during the rating upgrade and downgrade announcements in Australia However, no conclusion could be made for bonds that remained as speculative grade, bonds that moved from speculative grade to investment grade, or bonds that dropped from investment grade to speculative grade This was because the number of observations in Australia was very small Based on the S&P downgrade announcements, the negative reaction in Australia was larger than that seen in the UK Furthermore, in Australia, the S&P outperformed Moody’s during the downgrade announcements, but both performed at the same level during the upgrade announcements The different market reactions between Australia and the UK to the bond rating changes could be a result of different market size, market depth or market structure The fifth and final study examined the possible impact of news transmission across markets during rating changes in the UK The news on rating changes for corporate bonds issued by foreign companies in the UK may contaminate and spill over to foreign companies’ local share prices The final sample of foreign companies contained 155 rating changes announcements and was divided into three samples based on the geographical location of the foreign issuers No news transmission was observed from the UK to other countries during the corporate bond rating upgrade The good news on rating upgrades for bonds issued by foreign companies in the UK thus did not spill over to their local share prices Significant negative reactions were found in the combination sample (based on daily observations) and the Asia-Pacific issuers (based on subperiod analysis) during the downgrade announcements Based on the daily and subperiod observations, there was limited evidence indicating that the European companies were also affected when the rating agencies revised their UK-issued bond ratings A possible explanation for this response could be related to geographical proximity The European issuers in the UK originated from Austria, Denmark, Finland, France, Germany, Italy, Ireland, the Netherlands, Norway, Poland, Russia, Spain, Sweden and Switzerland, who are all close neighbours of the UK Consequently, bad news transmits more rapidly if the foreign issuer is located close to the UK Hence, there was sufficient evidence to support the existence of the spillover effect on the local share price of the foreign issuers that experienced rating downgrades for UK-issued bond In terms of analysing the 217 spillover effect of rating events on the foreign issuer’s share price, the role of the MSCI World Index as the market proxy seemed to outperform other indices 8.3 Limitations of Study There are six limitations of this research First, the limited sample period of this study may affect generalisation of the findings for the UK share price reaction reported in this thesis The number of observations based on the UK and Australian markets is small compared to studies conducted in the US.47 This too may affect generalisation of the findings Second, the thesis investigated the influence of private information by focusing on the share price reaction during the bond rating changes However, no analysis could be carried out to test the shareholder’s wealth hypothesis since this thesis did not investigate the effect of rating changes on the bond price and possible bondholder-shareholder wealth transfer Third, this thesis concentrated on public companies listed in the stock exchange Private companies were excluded from the samples because of the unavailability of data on their share prices Usually, the size of public companies is large compared to private companies Hence, the findings of this thesis only reflect the reaction of public companies to bond rating changes announcements Fourth, the share prices and the company-unique characteristics used in this thesis are based on the availability of data in the DataStream These factors may impose some limits on the interpretation and generalisation of the findings Fifth, the information on dates of rating changes for all corporate bonds used in this thesis is provided by Standard and Poor’s and Moody’s Due to financial constraints, other important information pertaining to the corporate bonds, such as (i) whether the bonds are exclusively issued in the UK, (ii) whether the bonds are offered to institutional investors and/or retail investors, and (iii) whether the bonds are traded on other exchanges is unavailable It is recognised that this may limit the interpretation of the data with regard to the transmission of information across markets Further, some of the shares issued by foreign companies in the 47 For example, a previous US-based study by Hite and Warga (1997) used 2800 bonds from 1200 companies, and Hand, Holthausen and Leftwich (1992) used 1100 bond rating changes announcements in their research 218 UK are cross-listed in several exchanges This thesis, however, only considers the exchange where the parent company is located Once again, it is acknowledged that this may limit the interpretation of the findings The final limitation that may affect the generalisation of the findings was that approximately 70% of the rating changes announcements in the UK and Australia were for bonds that remained at the investment grade Hence, the overall findings of this thesis may reflect the market reaction to rating changes for the investment grade bonds, but not for other bond grades 8.4 Directions for further research This research could be expanded in various directions Five suggestions are offered First, the period of the study used in this thesis is 10 years from January 1997 to December 2006 A longer study period that includes the global financial crisis that started in the US in 2007 could provide futher informative and useful findings The sub-prime crisis may be an important opportunity to compare the information value of bond rating changes in the precrisis and post-crisis period in the UK Second, this thesis concentrated on two developed capital markets: the UK and Australia Investigating emerging capital markets might also be helpful to generalise the findings on the information value of bond rating changes Third, while there is an extensive literature on intra-industry effects, such as the contagion effect and the competitive effect in the US, this is not the case for the UK The effect of bond rating changes in the UK may not only affect the rerated companies but also other companies in the same industry Fourth, further research on the impact of news transmission of rating changes announcements on foreign issuer’s share prices should be carried out in the world’s largest capital market: the US A comprehensive study on the effect of the cross-market spillover during rating changes on the different bond grades could also be useful This suggested research could assist in interpreting and understanding the bond grades that reflect different default risks and their impact on share prices 219 Finally, smaller 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degree of uncertainty in the market and the impact of rating changes is therefore more severe to the company that offers minimal information to the public Based on data of corporate bond rating