The purpose of the study was to find the best prediction models of short-term bank CD ratings using financial variables. This study used short-term bank CD ratings assigned by Moody's and Standard and Poor's.

This dissertation examines the reaction of common stock prices to the announcement of changes in bond ratings by Moody's Bond Service, while having a control for differential information availability. The Institutional Brokers Estimate System (I/B/E/S) number of security analysts and coefficient of variation of earning per share (EPS) estimates are used as a proxy for information availability of the firms. Past studies differs in their conclusions as to whether the market has responded to announcement of bond rating changes. None of past studies have controlled for differential information availability. This study, using daily stock returns data and the event study methodology with the statistical test, finds that while the sample of rating downgrades exhibit significantly negative abnormal price effect during the announcement period, the magnitude of this effect is significantly higher for firms with low information availability. For the rating upgrades, the sample as a whole has no abnormal announcement period returns, but the sample of firms with lower information earns significantly positive abnormal returns. This study provides support for the hypothesis that the announcement effect of bond-rating changes is conditional on the information available about the firm.

The purpose of this study is to examine the wealth effect of the Risk-Based Capital (RBC) regulation on the U.S. commercial banking industry. The RBC plan was first proposed in January 1986, and its final form was announced on July 11, 1988. This plan resulted from dissatisfaction with the old capital regulation, which did not account for asset risk and off-balance sheet activities. The present study hypothesizes that the new regulation restricted bank optimal behavior and, therefore, adversely affected stock prices. The second and third hypotheses suggest that investors used company specific information, Net Tier 1 and Total risk-based capital ratios respectively, in valuing stocks of the affected bank holding companies. Hypotheses four and five suggest that abnormal returns are proportionally related to the levels of Net Tier 1 or Total RBC ratio. Both the traditional event study and the portfolio time-series regression, with RBC ratios (Net Tier 1 or Total) as the weight factors, are used in this study.