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Sovereign ceilings “lite”? The impact of sovereign ratings on corporate ratings

  • Borensztein, Eduardo
  • Cowan, Kevin
  • Valenzuela, Patricio

Although credit rating agencies have gradually moved away from a policy of never rating a corporation above the sovereign (the ‘sovereign ceiling’), it appears that sovereign credit ratings remain a significant determinant of corporate credit ratings. We examine this link using data for advanced and emerging economies over the period of 1995–2009. Our main result is that a sovereign ceiling continues to affect the rating of corporations. The results also suggest that the influence of a sovereign ceiling on corporate ratings remains particularly significant in countries where capital account restrictions are still in place and with high political risk.

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File URL: http://www.sciencedirect.com/science/article/pii/S0378426613002768
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Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 37 (2013)
Issue (Month): 11 ()
Pages: 4014-4024

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Handle: RePEc:eee:jbfina:v:37:y:2013:i:11:p:4014-4024
Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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