The Marketing of Credit Ratings: How Financial Literacy Impacts Investment Decisions

Abstract

The study broadly investigates the impact of changes in credit ratings of companies on the share prices of small-cap, midcap and large cap Indian companies, using event study methodology for a period of 30 days. This study specifically looks into whether investors react significantly to changes in the companies' ratings and examines whether there is a meaningful difference in the share price value before and after credit rating announcement dates. In order to look into the aforementioned issue, the study takes into consideration a sample of ten small-cap, ten mid-cap, and ten large-cap businesses listed on the National Stock Exchange for the year 2019–2023. According to the study's findings, ratings upgrades and downgrades have a big influence on stock performance. The effects of these announcements are more noticeable both close to the announcement date and further in the future. As a result, the study notes that rating releases significantly affect company share prices both immediately and over time. It has been noted that downgrade statements have a greater effect on a company's share price than upgrading ones.