Variations in sovereign credit quality assessments across rating agencies

P Hill, R Brooks, Robert Faff

Research output: Contribution to journalArticle

67 Citations (Scopus)

Abstract

We investigate agency variation in credit quality assessment (Standard and Poor’s vs. Moody’s vs. Fitch) employing sovereign ratings data for 129 countries, spanning the period 1990–2006. While we find that the credit rating agencies often disagree about credit quality, it is usually confined to one or two notches on the finer scale. We find that several variables have varying importance in explaining ratings across agencies which leads us to conclude that material heterogeneity exists between them. Also, while watch and outlook procedures are generally strong predictors of rating changes relative to other public data, additional significant variables suggest that it might be possible to augment these agency data to provide better forecasts of future rating changes.
Original languageEnglish
Pages (from-to)1327-1343
Number of pages17
JournalJournal of Banking and Finance
Volume34
Issue number6
DOIs
Publication statusPublished - Jun 2010

Keywords

  • credit rating
  • rating transition
  • prediction
  • information content
  • sovereign

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