Sovereign credit rating determinants under financial crises

Determinants of credit ratings: evidence from panel discrete model

“…The higher the country's debt, the more vulnerable it became to default and liquidity problems. This result is in accordance with the empirical evidence of Mellios and Paget-Blanc (2006), Jaramillo (2010), Afonso et al (2011) and Teixeira et al (2018). The results also indicate that development dummies have an important influence on credit ratings.…”

“…This effect reflects the fact that countries with higher levels of inflation are less likely to get a better rating. The negative relation between inflation and rating has been previously obtained by Bissoondoyal-Bheenick (2005), Cantor and Packer (1996), Mellios and Paget-Blanc (2006), Depken et al (2011), Erdem and Varli (2014) and Teixeira et al (2018). A 1 percent increase in debt will decrease the probability of being in investment grade country by 4 percent.…”

“…Bozic and Magazzino (2013) based on a sample of 139 countries provided evidence that per capita gross national income, inflation, unemployment, fiscal balance, government debt and default history significantly affect ratings. Teixeira et al (2018), using panel data of 86 countries for 1993-2013, concluded that a set of macroeconomic, external, government and qualitative factors play an important role on sovereign credit ratings. Mulder and Perrelli (2001) focused on a set of emerging market economies and found that the ratio of investment to GDP has the most significant impact on rating changes across countries.…”

“…dependent variable credit rating was transformed to a linear scale (Afonso, 2003;Alexe et al, 2003;and Butler and Fauver, 2006). Recent studies began to employ probit models (Afonso et al, 2007;Afonso et al, 2009;Afonso et al, 2011;Gültekin-Karakaş et al, 2011;Brůha et al, 2017;Teixeira et al, 2018). Based on the above literature this study aims to fill the gap by examining credit ratings with panel discrete model.…”

Banks' profitability, institutions, and regulation in the context of the financial crisis

“…We introduce in our model the rating of the country as an external control variable. Following Teixeira, Silva, Ferreira, and Vieira (), we measure the rating in each year as the arithmetic average of the rating provided by the main rating agencies: Moody's, Fitch, and Standard and Poor's, after converting the rating in a numeric scale from 1 to 21, where 1 indicates the worst rating and 21 the best rating, as depicted in Table . We then transform this variable into a categorical variable with three rating categories: two for the investment grade debt level and another for the noninvestment grade level.…”