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Financial Openness, Domestic Financial Development and Credit Ratings

Listed author(s):
  • Eugenia Andreasen
  • Patricio Valenzuela

    ()

This paper shows that financial openness significantly affects corporate and sovereign credit ratings, and that the magnitude of this effect depends on the level of development of the domestic financial market. Issuers located in less financially developed economies stand to benefit the most from opening up their capital accounts, whereas the impact of this effect decreases as the level of development of the domestic capital market improves. JEL classification: F34; G15; G38.

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File URL: http://www.dii.uchile.cl/~cea/sitedev/cea/www/download.php?file=documentos_trabajo/ASOCFILE120150619115258.pdf
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Paper provided by Centro de Economía Aplicada, Universidad de Chile in its series Documentos de Trabajo with number 315.

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Date of creation: 2015
Handle: RePEc:edj:ceauch:315
Contact details of provider: Web page: http://www.dii.uchile.cl/cea/

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  1. Baltagi, Badi H. & Demetriades, Panicos O. & Law, Siong Hook, 2009. "Financial development and openness: Evidence from panel data," Journal of Development Economics, Elsevier, vol. 89(2), pages 285-296, July.
  2. Geert Bekaert & Campbell R. Harvey, 2000. "Foreign Speculators and Emerging Equity Markets," Journal of Finance, American Finance Association, vol. 55(2), pages 565-613, 04.
  3. Chinn, Menzie D. & Ito, Hiro, 2006. "What matters for financial development? Capital controls, institutions, and interactions," Journal of Development Economics, Elsevier, vol. 81(1), pages 163-192, October.
  4. Gelos, R. Gaston & Sahay, Ratna & Sandleris, Guido, 2011. "Sovereign borrowing by developing countries: What determines market access?," Journal of International Economics, Elsevier, vol. 83(2), pages 243-254, March.
  5. Sofia Bauducco & Alexandre Janiak, 2012. "Minimum wages strike back: the effects on capital and labor demands in a large-firm framework," Documentos de Trabajo 287, Centro de Economía Aplicada, Universidad de Chile.
  6. Luc Laeven, 2014. "The Development of Local Capital Markets; Rationale and Challenges," IMF Working Papers 14/234, International Monetary Fund.
  7. Anusha Chari & Peter Blair Henry, 2004. "Risk Sharing and Asset Prices: Evidence from a Natural Experiment," Journal of Finance, American Finance Association, vol. 59(3), pages 1295-1324, 06.
  8. Fischer, Ronald & Valenzuela, Patricio, 2013. "Financial openness, market structure and private credit: An empirical investigation," Economics Letters, Elsevier, vol. 121(3), pages 478-481.
  9. Denzler, Stefan M. & Dacorogna, Michel M. & Muller, Ulrich A. & McNeil, Alexander J., 2006. "From default probabilities to credit spreads: Credit risk models do explain market prices," Finance Research Letters, Elsevier, vol. 3(2), pages 79-95, June.
  10. Darren J. Kisgen & Philip E. Strahan, 2010. "Do Regulations Based on Credit Ratings Affect a Firm's Cost of Capital?," Review of Financial Studies, Society for Financial Studies, vol. 23(12), pages 4324-4347, December.
  11. Antonio Spilimbergo & Alessandro Prati & Jonathan David Ostry, 2009. "Structural Reforms and Economic Performance in Advanced and Developing Countries," IMF Occasional Papers 268, International Monetary Fund.
  12. Felipe Balmaceda & Ronald Fischer, 2010. "Economic performance, creditor protection, and labour inflexibility," Oxford Economic Papers, Oxford University Press, vol. 62(3), pages 553-577, July.
  13. Borensztein, Eduardo & Cowan, Kevin & Valenzuela, Patricio, 2013. "Sovereign ceilings “lite”? The impact of sovereign ratings on corporate ratings," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4014-4024.
  14. Prati, Alessandro & Schindler, Martin & Valenzuela, Patricio, 2012. "Who benefits from capital account liberalization? Evidence from firm-level credit ratings data," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1649-1673.
  15. Constantin Mellios & Eric Paget-Blanc, 2006. "Which factors determine sovereign credit ratings?," The European Journal of Finance, Taylor & Francis Journals, vol. 12(4), pages 361-377.
  16. Andreasen, Eugenia & Schindler, Martin & Valenzuela, Patricio, 2015. "Capital Controls and the Cost of Debt," Working Papers 15-02, University of Pennsylvania, Wharton School, Weiss Center.
  17. Richard Cantor & Frank Packer, 1996. "Determinants and impact of sovereign credit ratings," Economic Policy Review, Federal Reserve Bank of New York, issue Oct, pages 37-53.
  18. Darren J. Kisgen, 2006. "Credit Ratings and Capital Structure," Journal of Finance, American Finance Association, vol. 61(3), pages 1035-1072, 06.
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