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Sovereign Ceilings "Lite"? The Impact of Sovereign Ratings on Corporate Ratings

Author

Listed:
  • Borensztein, Eduardo

    (Inter-American Development Bank)

  • Cowan, Kevin

    (Central Bank of Chile)

  • Valenzuela, Patricio

    (University of Chile)

Abstract

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. This effect is robust to a broad range of alternative specifications.

Suggested Citation

  • Borensztein, Eduardo & Cowan, Kevin & Valenzuela, Patricio, 2013. "Sovereign Ceilings "Lite"? The Impact of Sovereign Ratings on Corporate Ratings," Working Papers 13-11, University of Pennsylvania, Wharton School, Weiss Center.
    • Handle: RePEc:ecl:upafin:13-11
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    File URL: http://fic.wharton.upenn.edu/fic/papers/13/13-11.pdf
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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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