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The Impact of Sovereign Ratings on Eurozone SMEs Credit Rationing

Listed author(s):
  • Demoussis, Michael
  • Drakos, Konstantinos
  • Giannakopoulos, Nicholas

In this study we investigate whether sovereign credit ratings have any discernible impact on credit rationing in Euro zone countries. We utilize firm-level data from the Survey on the Access to Finance of SMEs for the period 2009-2013 conducted by the ECB. A negative association between the rating of sovereign creditworthiness and credit rationing is identified, while credit rationing varies substantially even among countries with the highest quality of sovereign bonds. Credit rationing is lower in sovereigns with high quality ratings and higher in sovereigns near default. These results remain intact when fundamental firm characteristics (e.g. firm’s age and size, sector of economic activity, financial situation etc.) are taken into consideration. This indicates that the interconnection of sovereign debt risk with domestic credit market outcomes is robust.

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File URL: https://mpra.ub.uni-muenchen.de/76364/1/MPRA_paper_76364.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 76364.

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Date of creation: 2016
Handle: RePEc:pra:mprapa:76364
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