What Is the Value of Sovereign Ratings?

Gaillard, Norbert

doi:10.1111/geer.12018

Cited by 27 publications

(21 citation statements)

References 6 publications

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“…The literature about ratings has att empted to link the eff ect of ratings with the spread (Reisen and Maltz an, 1999), to verify the independence of the rating agencies' decisions (Gande and Parsley, 2004), to fi nd spill-over eff ects (Rigobon, 2002), to analyze the existence of the pro-cyclicality (Gaillard, 2014), or to obtain the rating's determinants (Cheung, 1996;Afonso, 2003;Venneri, 2009). In the context of developing countries, Monfort and Mulder (2000), using a sample of 20 emerging countries in the period 1994-1999, show that credit ratings have a degree of inertia and follow a random walk in an error correction model, and the lagged variables of debt related to export and growth of exports contribute to current ratings.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Their results show signifi cant responses of government bond yield spreads to changes in rating notations and outlook, particularly in the case of negative announcements. Gaillard (2014) provides an analysis of sovereign ratings, including the recent default of Greece and concludes that credit ratings are more stable than market-based indicators, which means that their pro-cyclical role could have been much sharper. In the same year, Afonso, Gomes and Taamouti (2014) examined EU countries from 1995 until 2011; they used sovereign ratings established by the rating agencies S&P, Moody's and Fitch concluding that rating upgrades do not have any signifi cant eff ect on volatility, but sovereign downgrades increase bonds volatility after two lags.…”

Section: Literature Reviewmentioning

confidence: 99%

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Determinants of Sub-Sovereign Government Ratings In Europe

Jannone-Bellot

Martí‐Selva

Menéndez

2017

TRAS

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The aim of this paper is to identify the determinants of the rating assigned to sub-sovereign entities in Germany, Austria, Belgium, France, Italy and Spain, using a total of 92 territorial entities for the 1989-2012 period. Multinomial ordered probit estimation models were estimated for each specifi cation and agency.We conclude that the country's rating is one of the most important determinants of regional government's ratings with a positive infl uence (as expected), and that the country debt/GDP ratio is a stronger determinant for regions than their own indebtedness with a negative sign. Other relevant variables are population growth rate, unemployment rate, elderly people weight, regional public expenditure weight and size. Additionally, economic variables, such as country's rating and population growth are more important to Fitch; whereas budget variables and size variables are more relevant to Moody's. Debt variables and elderly people ratio are more important to S&P.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Determinants of Sub-Sovereign Government Ratings In Europe

Jannone-Bellot

Martí‐Selva

Menéndez

2017

TRAS

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“…In 2015, the three biggest international rating companies were Fitch, Moody's, and Standard & Poor's (Distinguin, Hasan, & Tarazi, 2013). According to Gaillard (2014), to develop ratings, the agencies (CRAs) visit the companies and countries assessed in order to discuss financial and operational plans and performance strategies among all participants.…”

Section: Ratings and The Credit Rating Agencies (Cras)mentioning

confidence: 99%

Can accounting-based and market-based indicators predict changes in the risk rating of brazilian banks?

Garcia

Monte-mor

Tardin

2019

RBGN

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Purpose-This work aims to analyze whether market indicators, in complementarity to accounting indicators, have the ability to anticipate changes (upgrades or downgrades) in the assessments of risk rating (rating) of banks in Brazil. Design/methodology/approach-We used information based on the merger of two databases, Economatica and Standard & Poor's/Fitch, from 2010 to 2014, and linear regressions based on probit models. Findings-Our results show that market-based indicators as Sovereign Risk and GDP growth, together with accounting-based indicators as asset quality, liquidity, risk, capital and profitability, have predictive power for risk rating changes of banks in Brazil. The results still show that the market did not price changes in Brazilian banks' ratings in windows ending in the event date. Such evidence suggest that Sovereign Risk and economic-systemic factors can be used to proxy for risk in volatile markets with high uncertainty. Originality/value-Unlike in developed countries, the Brazilian stock market, young and not very representative of the economy, was not able to anticipate changes in the banks' rating. This study anticipates information to investors who aid in the decision to buy, hold or sell securities, and signals that the financial system is more susceptible to macroeconomic shocks in unstable economies.

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“…Accordingly, studies that have tried to identify the determinants of sovereign ratings and their weighting have not produced definitive results (Afonso, Gomes, and Rother ; Hill, Brooks, and Faff ). Although many studies assert that CRAs take political conditions into account, most of them produced insights on rating decisions with regard to developing countries, which may not be readily transferable to developed countries (Gaillard ).…”

Section: The Cognitive Authority Of Sovereign Ratings and Implicationmentioning

confidence: 99%