Do bond rating changes affect the information asymmetry of stock trading?

Yan He, Junbo Wang, K. C.John Wei

Research output: Journal article publicationJournal articleAcademic researchpeer-review

10 Citations (Scopus)


Using a sample of 279 upgrades and 310 downgrades from 1996 to 2004, we find that bond rating changes affect the information asymmetry of stock trading and other measures of information risk. Specifically, when a firm's bond rating is upgraded, its stock information asymmetry and its analysts' earnings forecast dispersion are significantly reduced, while the institutional equity holdings of its shares are significantly increased. The reverse is true for a downgrade. In addition, the degree of change in stock information asymmetry is positively associated with the magnitude of the bond rating changes.

Original languageEnglish
Pages (from-to)103-116
Number of pages14
JournalJournal of Empirical Finance
Issue number1
Publication statusPublished - 1 Jan 2011
Externally publishedYes


  • Credit rating changes
  • Information asymmetry
  • Probability of information-based trades (PIN)

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this