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Sovereign credit ratings: the ripple effect of investor protection

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  • Hmiden, Oussama Ben
  • Berre, Max
  • Tselika, Maria

Abstract

Despite extensive research on the determinants of sovereign credit ratings, the role of legal institutions such as investor protection remains underexplored. This paper investigates the relationship between investor protection and sovereign credit ratings using a sample of 39 countries from 2000 to 2023, in a complex interdependent system. Our results indicate that higher levels of investor protection are associated with stronger sovereign credit ratings, while trade openness partially mediates the effect, thus offsetting the positive impact of investor protection on sovereign credit ratings. The findings remain robust to various specifications, with greater sensitivity observed in common-law jurisdictions.

Suggested Citation

  • Hmiden, Oussama Ben & Berre, Max & Tselika, Maria, 2025. "Sovereign credit ratings: the ripple effect of investor protection," Finance Research Letters, Elsevier, vol. 86(PB).
    • Handle: RePEc:eee:finlet:v:86:y:2025:i:pb:s1544612325017714
    DOI: 10.1016/j.frl.2025.108517
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    Keywords

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    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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