Do cultures influence abnormal market reactions before official sovereign debt rating downgrade announcements?

Keith Jakob, Yoonsoo Nam

Research output: Contribution to journalArticlepeer-review

Abstract

We investigate whether cultural norms influence the way market information is incorporated into overall market prices. We examine whether cultures influence abnormal market reactions before official sovereign debt rating downgrade announcements across 46 countries. Michaelides et al. (2015) find that institutional quality is significantly associated with less negative abnormal market reactions prior to downgrades. Hofstede's six cultural dimensions (Hofstede and Bond, 1988) are used to measure cultural differences. We show that high masculinity and high individualism are significantly associated with less negative abnormal market reactions. Masculinity remains significant when the model includes institutional quality and other key variables.

Original languageEnglish
Pages (from-to)65-75
Number of pages11
JournalJournal of International Financial Markets, Institutions and Money
Volume47
DOIs
StatePublished - Mar 1 2017

Keywords

  • Abnormal market reactions
  • Cultures
  • Individualism
  • Masculinity
  • Overconfidence
  • Sovereign debt rating downgrades

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