Banks’ Credit Ratings – Domestic and Foreign Notes

Patrycja Chodnicka-Jaworska

Abstract


The aim of the paper is to analyse the differences between foreign and domestic notes given to banks by credit rating agencies. Following a literature review, the following hypothesis was proposed: Financial indicators have a stronger impact on the credit ratings of domestic rather than of foreign banks. The hypothesis was verified using panel ordered probit models. The analysis was based on European banks’ long-term issuer credit ratings given by S&P, Fitch and Moody between 2000 and 2015.


Keywords


credit rating, default risk, financial indicators, banking sector

Full Text:

PDF

References


Aver, B. (2008) “An Empirical Analysis of Credit Risk Factors of the Slovenian Banking System”. Managing Global Transitions 6 (3): 317–34.

Bissoondoyal-Bheenick, E. and Treepongkaruna, S. (2009) “An Analysis of the Determinant of Bank Ratings: Comparison across Rating Agencies”. Working Paper. Monash University, Department of Accounting and Finance.

Bolton, P., Freixas X. and Shapiro, J. (2012) “The Credit Ratings Game”. Journal of Finance 67 (1): 85–111, https://doi.org/10.1111/j.1540-6261.2011.01708.x.

Bongaerts, D. (2014) “Alternatives for Issuer-paid Credit Rating Agencies”. ECB Working Paper, vol. 1703, August.

Caporale, G. M., Matousek, R. and Stewart, C. (2009) “Rating Assignments: Lessons from International Banks”. Working Paper, vol. 2618, https://doi.org/10.2139/ssrn.1431384.

Ferri, G., Liu, L. G. and Stiglitz, J. (1999) “The Procyclical Role of Rating Agencies: Evidence from the East Asian Crisis”. Economic Notes 28 (3): 335–55, https://doi.org/10.1111/1468-0300.00016.

Gogas, P., Papadimitriou, T. and Agrapetidou, A. (2013) “Forecasting Bank Credit Ratings”, Working Paper, vol. 60/13. Rimini Centre for Economic Analysis.

Griffin, J. M., Nickerson, J. and Tang, D. Y. (2013) Rating Shopping or Catering? An Examination of the Response to Competitive Pressure for CDO Credit Ratings”. Review of Financial Studies 26 (9): 2270–2310, https://doi.org/10.1093/rfs/hht036.

Hau, H., Langfiel, S. and Marques-Ibanez, D. (2012) “Bank Ratings. What Determines Their Quality?”. EBC Working Paper Series, vol. 1484, October, https://doi.org/10.2139/ssrn.2171182.

Hassan, O. A. G. and Barrell, R. (2013) “Accounting for the Determinants of Banks’ Credit Ratings”. Brunel University of London Economics and Finance Working Paper Series, vol. 13–02.

Jiang, J., Stanford, M. H. and Xie, Y. (2012) “Does It Matter Who Pays for Bond Ratings? Historical Evidence”. Journal of Financial Economics 105 (3): 607–62, https://doi.org/10.1016/j.jfineco.2012.04.001.

Laere, E., Vantieghem, J. and Baesens, B. (2012) “The Difference between Moody’s and S&P Bank Ratings: Is Discretion in the Rating Process Causing a Split?”. RMI Working Paper, vol. 12/05.

Mathis, J., McAndrews, J. and Rochet, J. C. (2009) “Rating Theaters: Are Reputation Concerns Powerful Enough to Discipline Rating Agencies?”. Journal of Monetary Economics 56 (5): 657–74, https://doi.org/10.1016/j.jmoneco.2009.04.004.

Opp, C. C., Opp, M. M. and Harris, M. (2013) “Rating Agencies in the Face of Regulation”. Journal of Financial Economics 108 (1): 46–61, https://doi.org/10.1016/j.jfineco.2012.10.011.

Packer, F. and Tarashev, N. (2011) “Rating Methodologies for Banks”. BIS Quarterly Review, June.

Pasiouras, F., Gaganis, C. and Zopounidis, C. (2006) “The Impact of Bank Regulations, Supervision, Market Structure, and Bank Characteristics on Individual Bank Ratings: A Cross-country Analysis”. Working Paper. Technical University of Crete, Department of Production, Engineering, and Management.

Peresetsky, A. and Karminsky, A. (2008) “Models for Moody’s Bank Ratings”. BOFIT Discussion Papers, vol. 17, Bank of Finland, https://doi.org/10.2139/ssrn.1304590.

Poon, W. P. H., Firth, M. and Fung, H. (1999) “A Multivariate Analysis of the Determinants of Moody’s Bank Financial Strength Ratings”. Journal of International Financial Markets, Institutions and Money 9 (3): 267–83, https://doi.org/10.1016/S1042-4431(99)00011-6.

Shen, C., Huang, Y. and Hasan, I. (2012) “Asymmetric Benchmarking in Bank Credit Rating”. Journal of International Financial Markets, Institutions & Money 22 (1): 171–193, https://doi.org/10.1016/j.intfin.2011.08.004.

Winton, A. and Yerramilli, V. (2011) “Lender Moral Hazard and Reputation in Originate-to-Distribute Markets”. Working Paper, https://doi.org/10.2139/ssrn.1986956.

Xia, H. and Strobl, G. (2012) “The Issuer-pays Rating Model and Ratings Inflation: Evidence from Corporate Credit Ratings”. Working Papers, https://doi.org/10.2139/ssrn.2002186.




DOI: https://doi.org/10.15678/AOC.2018.1806