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This paper examines the performance of emerging market bank stocks around the time of rating changes by major international agencies. The data suggest that downgrades on average have followed periods of negative cumulative abnormal returns for banks, although upgrades have not followed periods of positive returns. More important, stock prices either do not respond to rating changes or respond in the opposite direction to what would be expected if announcements conveyed value-relevant information. The paper concludes that there are limits to the extent that supervisors in emerging markets can rely on market participants to monitor the safety and soundness of banks.

Banks and Banking --- Finance: General --- Investments: Stocks --- Macroeconomics --- Investments: Bonds --- International Financial Markets --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- General Financial Markets: General (includes Measurement and Data) --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Price Level --- Inflation --- Deflation --- Finance --- Banking --- Investment & securities --- Emerging and frontier financial markets --- Stock markets --- Stocks --- Asset prices --- Financial markets --- Financial institutions --- Prices --- Bond ratings --- Banks and banking --- Financial services industry --- Stock exchanges --- Bonds --- United States