The influence of the Credit Rating Agencies upgrades and downgrades on debtors’ ability to pay back their debt timely and with a manageable default likelihood has been under examination for a long time. Our objective in this paper is to examine how the three major Credit Rating Agencies - CRAs (Moody’s, Standard & Poor’s, Fitch) affect the bond yields and equity returns in five European Union member States (Portugal, Ireland, Italy, Greece, Spain and France) which were identified us unable or in difficulty to refinance their government debt on their own during the economic crisis of 2008. Besides we will try to examine the information transfer from the aforementioned countries’ rating change to six other countries (Germany, Austria, Switzerland, Sweden, Netherlands, and UK) which have been specified as stable and trustworthy. More specifically, we employed an event study methodology to examine whether the change of a country’s credit worthiness delivers new information to market participants in accordance with a regression analysis aiming to examine the probability of having an impact in one country’s indicators because of the change in the rating of another country. We find that, the downgrades of the five countries under examination have a more significant impact compare to the upgrades for both the bond and stock markets. The most impactful country of the sample period was Greece followed by Portugal, Ireland, Italy and Spain. We conclude that there are evidence of specific information transfer among the examined countries.
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