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Credit rating model development: An ordered analysis based on accounting data

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  • Balios, Dimitris
  • Thomadakis, Stavros
  • Tsipouri, Lena

Abstract

In this paper we propose and test a methodology for constructing a credit rating model. We follow a polytomous ordered probit analysis leading to the specification of statistically significant credit rating intervals. We test our model with accounting data of Greek listed firms over the years 2004–2013, a period which includes both the pre-crisis growth and the crisis phase of the Greek economy and the stock market. Using the empirically—based rating categories that the model generates endogenously, we observe not only a clear and timely response of ratings to the changing economic environment, but we also obtain significant predictive ability over a period of one, two and three years.

Suggested Citation

  • Balios, Dimitris & Thomadakis, Stavros & Tsipouri, Lena, 2016. "Credit rating model development: An ordered analysis based on accounting data," Research in International Business and Finance, Elsevier, vol. 38(C), pages 122-136.
  • Handle: RePEc:eee:riibaf:v:38:y:2016:i:c:p:122-136
    DOI: 10.1016/j.ribaf.2016.03.011
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    References listed on IDEAS

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    Cited by:

    1. Bruno Figlioli & Rafael Moreira Antonio & Fabiano Guasti Lima, 2019. "Stock Price Synchronicity and Current and Potential Credit Ratings," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 11(10), pages 1-16, October.

    More about this item

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • M49 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Other

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