An Empirical Analysis of Municipal Bond Ratings in Virginia

Abstract

The paper investigates the determinants of municipal bond ratings in Virginia using an ordered‐probit analysis. We find that economic factors are the key determinants of municipal bond ratings in the State. Our ordered‐probit model correctly predicts approximately 70% of the actual sample which is not subject to sample selection bias.

An empirical analysis of net interest cost, the probability of default and the credit risk premium: a case study using the Commonwealth of Virginia

“…According to Loviscek and Crowley (1990), new residents to a locality buy new homes, pay taxes, and are involved in other activities that increase the localities revenue base. In this case higher revenues from a change in population reflects the ability to pay, which increases the likelihood that a municipality will be in a higher rating category (Badu and Daniels, 1997). This is also true as long as the change in population does not include a high number of new residents that depend on the resources of the city (such as welfare payments) for their support.…”

“…Results of their study showed that the probit model may be superior to the use of discriminant analysis based on debt and revenue variables. Using an ordered probit technique, Badu and Daniels (1997) examined the relative significance of internal factors used in grading municipal general obligation bond ratings in the Commonwealth of Virginia. The results showed that economic base factors are the most significant in determining municipal bond ratings in Virginia.…”

The effects of international off-site surveillance on bank rating changes

“…An ordered logit model with the random effects fitted by maximum likelihood are now well established in the economic and financial research literature of bond ratings and credit ratings (e.g., Kamstra et al 2001;Badu and Daniels 1997;Blume et al 1998;Chen 2003). Note that Walker and Duncan (1967) originally developed an ordered logit model for pooled data.…”

Kemampuan Firm Size dan Laverage Terhadap Bond Rating pada Perusahaan yang Terdaftar di Bursa Efek Indonesia

“…Dalam berinvestasi obligasi pun, para investor tetap perlu memperhatikan beberapa hal, salah satunya bond rating yang di berikan oleh lembaga pemeringkat obligasi sebagai acuan risiko gagal bayar dimasa yang akan datang (Badu and Daniels, 2013).…”