How do sovereign credit rating changes affect private investment?

Chen, Sheng‐Syan; Chen, Hsien-Yi; Chang, Chong-Chuo; Yang, Shu-Ling

doi:10.1016/j.jbankfin.2013.09.002

Cited by 37 publications

(27 citation statements)

References 66 publications

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“…They also highlight important inter-CRA differences, where Moody's has an informational lead in upgrades in developed markets, and Fitch downgrades are associated with significant currency depreciations in both developed and emerging markets. Chen et al (2013) find that countries experience significant declines in their private investment growth following sovereign rating downgrades by S&P. These declines following downgrades are found to last one to two years. They find that upgrades have a permanent impact on private investment growth.…”

Section: Market Impact Of Sovereign Rating Actionsmentioning

confidence: 87%

“…Afonso et al, 2012;Alsakka and ap Gwilym, 2012;, yet many studies examine data from only one CRA (e.g. Caporale et al, 2012;Chen et al, 2013). We also examine the joint impact of the three CRAs by constructing a 'new rating information' variable, which can potentially demonstrate that market participants make use of the rating information provided by all three CRAs.…”

Section: Introductionmentioning

confidence: 99%

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Does sovereign creditworthiness affect bank valuations in emerging markets?

Williams

Alsakka

Gwilym

2015

Journal of International Financial Markets, Institutions and Mo

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Section: Market Impact Of Sovereign Rating Actionsmentioning

confidence: 87%

Section: Introductionmentioning

confidence: 99%

Does sovereign creditworthiness affect bank valuations in emerging markets?

Williams

Alsakka

Gwilym

2015

Journal of International Financial Markets, Institutions and Mo

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“…Sovereign rating actions have wide-ranging implications for economies and markets (e.g. Adelino and Ferreira, 2016;Almeida et al, 2017;Borenzstein et al, 2013;Brooks et al, 2015;Chen et al, 2013Chen et al, , 2016Drago and Gallo, 2016;Kim and Wu, 2011). A particular aspect deserving a detailed evidence base is the potential spillover effects from a sovereign rating action to other countries' financial markets.…”

Section: Discussionmentioning

confidence: 99%

“…A large group of the related papers use data from only one CRA (e.g. Chen et al, 2013;2016;Drago and Gallo, 2016;Ferreira and Gama, 2007;Gande and Parsley, 2005;Ismailescu and Kazemi, 2010;Wengner et al, 2015), 7 hence cannot begin to consider inter-CRA effects. Others pool data from multiple CRAs (e.g.…”

Section: Prior Academic Researchmentioning

confidence: 99%

The influence of rating levels and rating convergence on the spillover effects of sovereign credit actions

Romero

Alsakka

Gwilym

2018

Journal of International Money and Finance

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Peer reviewed versionCyswllt i'r cyhoeddiad / Link to publication Dyfyniad o'r fersiwn a gyhoeddwyd / Citation for published version (APA): Abad, P., Alsakka, R., & ap Gwilym, O. (2018). The influence of rating levels and rating convergence on the spillover effects of sovereign credit actions. Journal of International Money and Finance, 85, 40-57. https://doi. AbstractThis paper assesses contagion and competition as alternative types of stock market spillovers arising from sovereign rating actions. Our research design is based on the premise that the type of spillover effects within and between groups of countries will be influenced by the sovereign rating level, split ratings and the extent of rating convergence i.e. specific types of rating action will induce different and/or stronger effects. The results reveal a clear pattern whereby downgrades of high-rated countries induce contagion to both high and low-rated countries, while downgrades of low-rated countries reveal the opposite i.e. they induce competitive effects. Split ratings are found to intensify stock market spillover effects. Rating convergence/divergence across similarly-rated sovereigns has a meaningful influence on the spillover effects. For the downgrades of high-rated countries, rating convergence mitigates the contagion effect to other high-rated countries in the region, but has very limited effect on the contagion to low-rated countries. For downgrades of low-rated countries, rating convergence strengthens the competitive effect on other low-rated countries but has little effect on the competitive impact on high-rated countries.JEL classification: G11, G14, G15.

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“…Segundo Cantor e Parker (1996) e White (2010), os relatórios dessas instituições apresentam a qualidade de crédito do tomador, assim como suas capacidades de honrar seus compromissos a tempo. Por outro lado, o rating soberano que, por sua vez, mede a estabilidade política, econômica e social dos países, é considerado em estudos relacionados a estrutura de capital e o desempenho das firmas (Chen, Chen, Chang & Yang, 2013& 2016Kaminsky & Schmukler, 2002).…”

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Governança corporativa, estrutura de capital, rating soberano e desempenho da firma: uma análise em níveis multipaís, nacional e regional

Jesuka¹

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Firm theory studies show that managers have to deal with agency and information asymmetry problems to align their interests with those of shareholders, creditors and stakeholders, while keeping the company valued. Considering the influences of internal and external environments, this study aimed to analyze the relationship between corporate governance, capital structure, sovereign rating and firm performance at multi-country, national and regional levels. In a first step, a multilevel regression model was performed using a sample of 823 Latin American listed companies from 2004 to 2018. In a second step, data from 671 Brazilian listed companies and Brazil's sovereign rating between 2010 and 2017 were considered to analyze the performance behavior at the national and regional levels, more specifically in the Triangulo Mineiro and Alto Paranaíba and southern of Goiás regions. A panel data regression was employed. The results from the first study show that sovereign rating positively impact the capital structure and the performance of Latin American companies. The board size as well as the dual roles of the CEO / Chairman of the board can destroy firm's value, while having an independent audit committee can increase both their indebtedness and performance. The evidence found reinforced the agency theory signaling that even with the adoption of good corporate governance practices, the more indebted companies are, the less valued they are. In the second study, at the national level we found that the board size, the audit reputation and sovereign rating positively affects the leverage of Brazilian companies. Return on assets was negatively influenced by the dual roles of the CEO / Chairman of the board and the size of the board, the return on equity is positively affected by the reputation of the audit, the concentration of ownership and control and the duality of CEO / Chairman. At the regional level, it was observed that companies that operate in TMAP and South Goiás regions are more leveraged due to the reputation of the audit and when there is an outsider in the board of directors, in contrast, leverage decreases when the board of directors is large and when there is concentration of ownership and control. Regarding to the performance, it was noted that for these companies ROA is positively influenced by the reputation of the audit and the presence of outsiders on the board, while the dual roles of CEO and Chairman can destroy it. Return on equity increases when there are professional directors on the board of directors, and decreases when there is a concentration of ownership and control.

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How do sovereign credit rating changes affect private investment?

Cited by 37 publications

References 66 publications

Does sovereign creditworthiness affect bank valuations in emerging markets?

Does sovereign creditworthiness affect bank valuations in emerging markets?

The influence of rating levels and rating convergence on the spillover effects of sovereign credit actions

Governança corporativa, estrutura de capital, rating soberano e desempenho da firma: uma análise em níveis multipaís, nacional e regional

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