The credit rating industry is a global industry with only three major actors, Moody’s, Standard & Poor’s and Fitch Ratings. The “big three” control the majority of the credit rating market and have powers, in the form of credit rating issuances, which they use to influence financial markets worldwide. Ever since their involvement in the fall of corporate giants in early 2000 and the financial crisis of 2008, the power and influence of the credit rating agencies, as well as questions regarding conflict of interest and transparency, have been a hot topic of debate.   The impact of credit ratings can be seen across multiple markets; however the focus of this study is on the stock market where every day investors can be affected. As Moody’s is one of the three largest CRAs in the world and is present worldwide, we apply their credit ratings when investigating the impact. Due to different characteristics of large and small markets, and since the US market is well studied; this study is conducted on the Swedish market. Thus, the aim of our study is to investigate the impact credit ratings from Moody’s have on the Swedish stock market and also, give a perspective on how the financial crisis of 2008 influences the potential impact.   We apply an event study method to isolate the events and measure the abnormal returns. To estimate the expected market return we use the market model on estimation periods of 60 to 120 days. The sample contains 71 individual credit rating changes from 17 firms listed on the Stockholm Stock Exchange and considers all uncontaminated credit rating changes issued by Moody’s on the Swedish market during the time period of 1990 to 2012.   Empirical evidence showed that the Swedish stock market is susceptible to Moody’s negative credit ratings but almost unaffected by the positive credit ratings. These findings are in line with previous research of Holthausen & Leftwich (1986) amongst others. Still, the effects discovered were not prolonged and no clear difference in impact was found after 2008.

Committee Chair: Dr. Shaun Wang Major Department: Risk Management and Insurance In this thesis I employ regime switching models on a unique dataset of bond downgrades to examine the information value of timely downgrades. I use ratings from a Nationally Recognized Statistical Rating Organization (NRSRO) and a non-NRSRO as proxies for the arrival of public and private information. Regime switching models allow us to identify the time at which a discrete shift in the underlying stock return process takes place, estimate the distribution of returns in each regime and also observe the duration of each regime associated with the day of the downgrade. The first contribution is proposing an alternative way to perform an event study. First I define a regime switching model with two regimes: one of low and high volatility. The probabilistic nature of regime switching models allows us to identify the exact day on which stock returns switch to a high volatility regime. This is directly observed through the estimated daily conditional probability of being in one of the two regimes. In summary, I find that stocks switch from a low-volatility regime (1.92%) to a high-volatility regime (6.10%) on the day of the downgrade. The high-volatility regime lasts for about three days and it is mainly driven by downgrades of the smaller bond rating company (non-NRSRO). The second contribution is to propose a method to quantify stock return distress costs associated with downgrades. This measure is based on the capital asset pricing model, uses the parameters of the regime switching model and the estimated daily conditional probabilities of being in each regime. I find that distress costs on stock returns range from 9.49% to 12.91% for the 10 days prior to the day of the downgrade when assuming unity for the market price of risk. The magnitude and direction (sign) of my estimates are consistent with prior literature on the information value of bond ratings. The third contribution is to propose an extension to regime switching models to the bivariate case with a common shock. I show through a state-contingent model how shocks to the economy may cause a one time loss that affects a portfolio of stocks. I derive the frequency and severity implications of such exogenous shocks on regime switching models.

Background Bangladesh is a developing country located in the southern part of Asia. Almost eighty percent of the total population of Bangladesh lives in rural areas and most of them are poor. These poor people are not qualified to get loan facilities from the formal financial sector due to the collateral requirements. And informal financial sector also make them unattractive due to their tendency of higher profit making. Muhammad Yunus and Grameen Bank jointly awarded Nobel Peace Prize 2006 for the creation of innovative credit idea called “micro credit” for the poor people who are ignored both from the formal and informal financial sector. Micro credit has been introduced in Bangladesh in 1976 that allows the poor people to get small amount capital as loan without collateral for starting self income generating activities with the objective of alleviate their poverty level and gradually improve their life status. Purpose The purpose of this study is to explore the role of micro credit in rural poor people daily life status improvement process in rural areas in Bangladesh. This study investigates the role of micro on life status improvement process of these poor borrowers. Method The qualitative method has been chosen for this study which is implemented in the form of interview approach. Empirical data has been collected from the Grameen Bank borrowers and its official in Bangladesh. Results This study tried to cover how micro credit allows the poor people in financial access, how can affect their income level by starting self income generating activities, asset holdings capacity, basic needs, living standard, poverty level and finally on their life status. This study also covers how social welfare and other services offered by the micro finance institutions affect the poor people’s life status. Based on the empirical findings, this study suggests that micro credit has positive impact on borrowers’ income level, asset holdings capacity, basic needs, living standard and their poverty level. Social welfare services can increase human capital skills, personal awareness level of the poor borrowers. And finally all these things gradually improve the daily life status of these borrowers.

Many scholars suggest that credit networks were fundamental to the operation of early modern towns. Unfortunately, the majority of this scholarship ignores the role of women in the debt and credit system. The legal position of early modern women and the nature of the available sources mean that womens experiences are generally not documented in any significant numbers. Historians are therefore forced to speculate on how women might have been involved in borrowing and lending and often end up writing as though the female experience of credit was identical to mens experience of the system. The records of the Baillie Court of Aberdeen, Scotland offer a glimpse at women engaging in debt and credit transactions in large numbers and pursuing transactions that went awry. This study looks at 671 debt cases brought before Aberdeens court system in two years in the late seventeenth-century and reveals that women participated in 46% of these cases. Similar studies, focusing mainly on England, have found female participation in debt and credit to hover closer to the 15% range. While there are some unique characteristics that might explain how Aberdeen would see more women becoming involved in the court system, there is little evidence that Aberdonian women were unusually active in the debt and credit system as a whole, in comparison to the rest of early modern Europe. Instead, Aberdeens court records reveal what was likely a very common, but undocumented, experience in the rest of the pre-industrial world. As a result of this unprecedented level of documentation, we see women involved who would otherwise be invisible to us. The Baillie Court shows married women involved in far greater numbers than either single women or widows, a fact which goes against the traditional image of single and widowed women as the only ones involved in the credit system through their roles as moneylenders. Instead, we find another level of women using debt and credit to secure goods for their households and participating in the economy of the town. We find that, although women were heavily involved in borrowing and lending, their experience of that system was significantly different than that of early modern men. The causes of debt and the amounts for which people would both sue and be sued were substantially different depending on ones gender and marital status. While the statistics that come out of this study are impressive, the human stories are even more enlightening. By examining individual cases, we can see how women negotiated the debt and credit and how they shaped that system to their own needs.

In order to reduce the risks, banks has two ways to evaluate the loan exposure. One is credit rating, and the other one is pledge collaterals. Many literatures and financial regulations are emphasizing on the importance of credit rating. However, with the illustration of a plenty of empirical study, the pledging collaterals are the popular way which was using by “lazy” banks. Credit rating or pledging with collaterals is the gap between theories and practices.  The aim of this thesis is to figure the factors which make the gap between the theories and practices. At last, the front-line employees are paid attention on. Since front-line employees are the first and direct one who contact customers. Reliability and responsiveness has a space to develop by training first-line employees, moral hazard controlling, and sectoral specialization the credit inspection.

Small and medium sized enterprises have become significant component of Chinese economy. At present, the financing difficulties of SMEs have become a biggest hurdle in sustainable Development of the "bottleneck." This paper analyzes the current condition of financing of SMEs in China specifically in Tianjin and existing problems and address these issues and put forward innovative financial schemes, develop the financial system, expand financing channels, to optimize the financial environment is difficult to solve the problem of SME financing priority. It needs to find more resources for better system. Three tested and tried approaches that have worked are; First, SMEs need backing from the government and its institutions. Then, the government needs to relax loans on the SME sector. Last and third, government needs to make use of other funds such as bonds, growth financing and other ways to push for SME financing, in a quicker approach.

The implication of credit rationing models states that the effect of monetary policy on output may be stronger when credit conditions are tight than when they are loose. Therefore, there may be a thresholde effect on the relation between real money supply and output. Existing empirical studies on testing threshold effects ignore the fact that the monetary policy and the credit conditions are endogenous, which are follow some optimal rules. Seeing that the past studies considering the endogenous monetary policy only cannot provide substantial evidence of the credit rationing theory, this article provides an extending test of threshold effects when monetary policy and the indicator of credit conditions are endogenous. Moreover, this study finds that the US aggregate data can still provide significant evidence of a threshold effect on the relation between money and output, comparing to the endogenous monetary policy partially considered.

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