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An analysis of the determinants of bank ratings: comparison across ratings agencies

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  • Emawtee Bissoondoyal-Bheenick
  • Sirimon Treepongkaruna

Abstract

The recent Global Financial Crisis has focused our attention on the integrity of rating agencies. Often condemned for being too slow to act, rating agencies have been blamed during many financial crises. This impression opens some research questions addressed in this paper. What are the determinants of banks ratings? How do they differ across ratings agencies? This paper analyses the quantitative determinants of bank ratings, provided by Standard & Poor’s, Moody’s, and Fitch in the United Kingdom and Australia. The main finding is that quantitative factors that reflect asset quality, liquidity risk, capital adequacy and operating performance are the key determinants of bank ratings across the rating agencies. However, macroeconomic variables and market risk factors do not seem to be contributing factors in explaining bank ratings in either country.

Suggested Citation

  • Emawtee Bissoondoyal-Bheenick & Sirimon Treepongkaruna, 2011. "An analysis of the determinants of bank ratings: comparison across ratings agencies," Australian Journal of Management, Australian School of Business, vol. 36(3), pages 405-424, December.
  • Handle: RePEc:sae:ausman:v:36:y:2011:i:3:p:405-424
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    1. repec:sgm:pzwzuw:v:15:i:66:y:2017:p:64-78 is not listed on IDEAS
    2. repec:bla:abacus:v:53:y:2017:i:1:p:59-93 is not listed on IDEAS
    3. Linnenluecke, Martina K. & Chen, Xiaoyan & Ling, Xin & Smith, Tom & Zhu, Yushu, 2016. "Emerging trends in Asia-Pacific finance research: A review of recent influential publications and a research agenda," Pacific-Basin Finance Journal, Elsevier, vol. 36(C), pages 66-76.

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    Keywords

    bank ratings; ordered response model;

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