This study examines how the effects of announced bond rating changes on stock prices vary depending on the degree of market competition. We analyze long-term data of the Korean stock market from 2001 to 2011. Our sample data include 640 listed companies, of which nonguaranteed bonds suffered rating changes over this time period. Through event studies of the entire data set, we find that the stocks of firms that suffered bond rating downgrades exhibit significantly negative abnormal returns. Considering the inverse relationship between industrial concentration and market competition, we classify market states into highly competitive, moderately competitive, and uncompetitive categories based on the Hirschman-Herfindahl Index (HHI). Firms in highly competitive markets have significant stock values for cumulative abnormal returns if they suffer bond rating upgrades or downgrades. However, we are unable to identify significant movements of abnormal returns in response to bond rating changes in moderately competitive or uncompetitive markets. These results suggest that the effects of announcements of bond rating changes on stock prices depend on the degree of market competition. We divide the samples into the “before crisis” period and the “after crisis” period considering the global financial crisis in 2008, which exerts tremendous influence on global stock markets. We find that before the crisis the stock market reacts only to bond rating upgrades, while after the crisis the highly competitive markets react to bond rating downgrades. Also, we find that after the crisis uncompetitive markets react negatively to bond rating upgrades. These results support the transfer of wealth between stockholders and bondholders observed by Goh and Ederington (1993) and Abad-Romero and Robles-Fernandez (2006), and confirms that this phenomenon also exists in the Korean stock market. Possible interpretations of these results are that the financial market suffered structural changes due to the crisis, and/or that market participants were affected by the crisis. The results of additional regression analyses indicate that the effects of announcing bond rating downgrades are enhanced as the degree of industrial concentration is increased. Based on our empirical results, we conclude that the degree of market competition is closely related to the effects of announcing bond rating changes.