Relationship between credit default swap (CDS) spreads and credit rating announcements in the case of R&D-leading companies

Szántó, Tünde Katalin and Kosztopulosz, Andreász (2026) Relationship between credit default swap (CDS) spreads and credit rating announcements in the case of R&D-leading companies. ECONOMY AND FINANCE: ENGLISH-LANGUAGE EDITION OF GAZDASÁG ÉS PÉNZÜGY, 13 (1). pp. 3-19. ISSN 2415-9379

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Abstract

Corporate insolvency causes significant economic losses not only for creditors,but also for owners, employees, business partners and the state, therefore reliable solvency forecasting is of paramount importance. Credit rating agencies,such as Standard & Poor’s, play a central role in assessing companies’ creditworthiness; however, their ratings are not without limitations, and marketplayers often regard market-provided information authoritative. In the creditdefault swap (CDS) market, spreads reflect real-time assessments of credit riskand may therefore be useful for analysing market reactions to credit ratings.The aim of this research is to analyse the extent to which Standard & Poor’s rating announcements can be considered predictable for companies characterisedby significant R&D activity, as well as how quickly and in what direction the CDSmarket reacts to these changes. The analysis examines the information content ofcredit ratings and market reaction times through the evolution of CDS spreads.The results may contribute to a deeper understanding of the relationship betweencredit ratings and market expectations, as well as to the refinement of credit riskforecasting in the corporate sector. Our research highlights that the market reacts asymmetrically to credit rating events: while CDS spreads can be used as areliable early warning indicator in the case of downgrades to refine credit riskmodels, upgrades retain their immediate market-moving, value-creating effect.These findings stress the importance of proactive risk monitoring for investorsand transparent crisis communication for the corporate sector.

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