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Do Global Credit Rating Agencies Think Globally? The Information Content of Firm Ratings around the World

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  • Ferri, Giovanni

    (University of Bari, Italy)

  • Li-Gang Liu

    (Asian Development Bank Institute, Tokyo)

Abstract

What is the information content of firm ratings? We disentangle the relative contribution to firms? ratings of sovereign risks and individual firms? performance indicators, reportedly employed by rating agencies. We reach three conclusions. First, sovereign risks? contribution is disproportionately greater in developing countries vis-ý-vis developed countries. Second, even controlling for the ?country ceiling effect??private ratings being constrained by their sovereign?s rating?firm ratings? information content is much smaller in developing countries. Third, cross-country indicators of information quality help explain but do not solve the puzzle entirely. Thus, global rating agencies do not (yet) think globally.

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Bibliographic Info

Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2002 with number 74.

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Date of creation: 29 Aug 2002
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Handle: RePEc:ecj:ac2002:74

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Cited by:
  1. Ricardo Correa & Kuan‐Hui Lee & Horacio Sapriza & Gustavo A. Suarez, 2014. "Sovereign Credit Risk, Banks' Government Support, and Bank Stock Returns around the World," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(s1), pages 93-121, 02.
  2. Seung Han & Yoon Shin & Walter Reinhart & William Moore, 2009. "Market Segmentation Effects in Corporate Credit Rating Changes: The Case of Emerging Markets," Journal of Financial Services Research, Springer, vol. 35(2), pages 141-166, April.
  3. Eduardo Borensztein & Kevin Cowan & Patricio Valenzuela, 2013. "Sovereign Ceilings “Lite”? The Impact of Sovereign Ratings on Corporate Ratings," Documentos de Trabajo 299, Centro de Economía Aplicada, Universidad de Chile.
  4. Blumenstock, Hendrik & von Grone, Udo & Mehlhorn, Marc & Merkl, Johannes & Pietz, Marcus, 2012. "Einflussfaktoren von CDS-Spreads als Maß für das aktuelle Bonitätsrisiko: Liefert das Rating eine Erklärung?," Bayreuth Working Papers on Finance, Accounting and Taxation (FAcT-Papers) 2012-03, University of Bayreuth, Chair of Finance and Banking.
  5. Klein, Christian & Stellner, Christoph, 2014. "Does sovereign risk matter? New evidence from eurozone corporate bond ratings and zero-volatility spreads," Review of Financial Economics, Elsevier, vol. 23(2), pages 64-74.

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