The purpose of this study is to examine how the decisions made by credit rating agencies (CRAs) impact the stock market, using a systematic and quantitative review of existing empirical studies. More specifically, we employ a meta-regression analysis (MRA) to investigate the extent and nature of the effect of rating agencies’ decisions on the stock market. We survey 62 studies published between 1978 and 2015. Our first finding is that the variation in reported estimates in primary studies is influenced by publication bias in favor of research that supports respectively a negative (positive) effect on the stock market when there is a negative (positive) rating event. Controlling for publication bias, the main findings of our meta-analysis indicate that negative rating decisions cause significant negative abnormal returns. This evidence suggests an informational effect. Our results also indicate that positive rating decisions do not have a significant effect. Finally, the MRA results reveal the importance of several factors related to primary study design, as well as to the nature and processing of data.

JEL codes: G14, G3

Keywords: meta-analysis, rating agencies’ decisions, stock returns, event study

Fields of research: stocks markets, capital markets, market regulation, risk analysis, econometrics