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Are credit rating agencies regionally biased?

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  • Yalta, A. Talha
  • Yalta, A. Yasemin

Abstract

We investigate claims of regional bias in the sovereign credit ratings given by the rating agencies Fitch, Moody’s and Standard & Poor’s by considering a wide range of macroeconomic, financial, institutional, regional and geopolitical indicators for 99 countries categorized into eight regions plus the United States. Empirical results based on seemingly unrelated regressions indicate a strong home country bias towards the United States, while there seem to be no special biases against individual groups of countries. We also demonstrate how modeling errors such as omitted variables can increase dispersion in the estimated regional effects, causing agencies to appear biased.

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  • Yalta, A. Talha & Yalta, A. Yasemin, 2018. "Are credit rating agencies regionally biased?," Economic Systems, Elsevier, vol. 42(4), pages 682-694.
    • Handle: RePEc:eee:ecosys:v:42:y:2018:i:4:p:682-694
    DOI: 10.1016/j.ecosys.2018.08.001
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    Cited by:

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    More about this item

    Keywords

    Sovereign ratings; Credit rating agencies; Credit risk; Seemingly unrelated regressions;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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