Journal of Emerging Technologies and Business Management


It is often argued that, economicfundamentals and financial markets are always in equilibrium and if otherwise, there would be opportunity /or arbitrage. The Greece default crisis which emerged as an important topic of discussion in the recent years, owes it to mismanagement of political, social and economic systems over a long period oflime. The financial and banking crisis o/‘Z008, helped reveal the true facts with respect to mismanagement such as larger fiscal deficits, current account deficits, ballooning debt levels, unemployments, negative GDP, manageable inflation with above normal interest rates. The credit rating agencies have been argued by many to also have significantly played an important role in unearthing the problems with respect to Greece and other neighboring countries such as Portugal and Spain. The downgrades ofsovereign credit ratings by three major credit rating agencies was thought to have significant impact on debt markets but less studies have been conducted on the financial markets. Thus, the study looks into the impact of these downgrades on not onlyAthens composite index but also on major indices (Seventeen indices) of the world. The event studies conducted find significant impact ofthese rating downgrades on theAthens composite index and other neighboring financial markets, but does notseem to have major impact of asia-pacific markets.