2008
DOI: 10.1016/j.ememar.2007.06.001
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Sovereign credit ratings, capital flows and financial sector development in emerging markets

Abstract: How does the sovereign credit ratings history provided by independent ratings agencies affect domestic financial sector development and international capital inflows to emerging countries? We address this question utilizing a comprehensive dataset of sovereign credit ratings from Standard and Poor's from 1995-2003 for a cross-section of 51 emerging markets. Within a panel data estimation framework, we examine financial sector development and the influence of sovereign credit ratings provision, controlling for … Show more

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Cited by 151 publications
(86 citation statements)
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“…Some works analyse the influence of changes in sovereign ratings on the domestic financial sector and on the inflows of international capital. This is the case of Kim and Wu (), which restricted their investigation to developing countries during 1995–2005. They found evidence that long‐term foreign currency sovereign credit ratings are important for improving financial intermediary development and for attracting capital flows.…”
Section: Literature Reviewmentioning
confidence: 99%
“…Some works analyse the influence of changes in sovereign ratings on the domestic financial sector and on the inflows of international capital. This is the case of Kim and Wu (), which restricted their investigation to developing countries during 1995–2005. They found evidence that long‐term foreign currency sovereign credit ratings are important for improving financial intermediary development and for attracting capital flows.…”
Section: Literature Reviewmentioning
confidence: 99%
“…In support of the informational value of credit ratings, Merrill Lynch (1999) purports that credit rating agencies can help lenders to “pierce the fog” of asymmetric information that surrounds lending relationships. In related lines of inquiry, previous studies such as Yi and Mullineaux (2006) find that syndicated bank loan ratings are informative for financial market participants, and Kim and Wu (2008) find emerging countries with better sovereign ratings were associated with more developed banking sectors.…”
Section: Introductionmentioning
confidence: 98%
“…Sovereign credit ratings thus affect not only the process of obtaining funds from the loan market and the direction of international banking flows as identified in Kim and Wu (2011) but can also be effective in determining the flow of foreign direct investments and portfolio equity flows (Kim and Wu, 2008). As the access to international financing is crucial for funding aggregate investments and consumption, there should be direct effects from sovereign credit ratings activity on individual countries' economic growth.…”
Section: Introductionmentioning
confidence: 99%