This work examines the information value of local Israeli credit rating announcements. This matter is also important to other small markets, in which a debt issuer may take advantage of a “rating shopping” process or choose to avoid a rating procedure altogether, because the agencies do not carry out unsolicited rating. We analyze the bond and equity markets response to various rating announcements at different time periods. We find that except for downgrades in 2008–2009 the rating announcements have no information value. It seems that generally the market internalizes most of the information prior to the rating announcements.

This study proposes models that can be used as shorthand analysis tools for CDS spreads and CDS spread changes. For this purpose, we examine the determinants of CDS spreads and spread changes on a broad database of 718 US firms during the period from early 2002 to early 2013. Contrary to previous studies, we find that market variables have explanatory power after controlling for firm-specific variables inspired by structural models. Three explanatory variables appear to outperform the other variables examined in this paper: Stock Return, the change in stock return volatility, and the change in the median CDS spread in the rating class. We also find that models used in the event study literature to explain spread changes can be improved by adding market variables. Furthermore, we show that ratings explain cross-sectional variation in CDS spreads even after controlling for structural model variables.