Abstract
The global financial crisis brought increased attention to the importance of rating agencies. The broad consensus was that the rating agencies were unable to detect any deterioration of the issuer's credit quality in a timely manner. This study analyzes the credit default swaps (CDSs) and stock market response to rating changes during the financial crisis and subsequent years. The sample includes 542 companies from the United States and 15 European countries and examines 915 corporate issuer ratings. The results show that there is no CDS market response to rating announcements during the crisis but that the stock market anticipates downgrade announcements.