Sovereign ceilings “lite”? The impact of sovereign ratings on corporate ratings

Although credit rating agencies have gradually moved away from a policy of never rating a corporation above the sovereign (the ‘sovereign ceiling’), it appears that sovereign credit ratings remain a significant determinant of corporate credit ratings. We examine this link using data for advanced and...

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Bibliographic Details
Published in:Journal of banking & finance 2013-11, Vol.37 (11), p.4014-4024
Main Authors: Borensztein, Eduardo, Cowan, Kevin, Valenzuela, Patricio
Format: Article
Language:English
Subjects:
Banking
Credit market
Credit rating
Credit ratings
Credit risk
Determinants
Economic planning
Economic policy
Impact analysis
Manycountries
Political risk
Rating services
Ratings & rankings
Sovereign ceiling
Sovereign debt
Sovereign risk
Studies
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Summary:Although credit rating agencies have gradually moved away from a policy of never rating a corporation above the sovereign (the ‘sovereign ceiling’), it appears that sovereign credit ratings remain a significant determinant of corporate credit ratings. We examine this link using data for advanced and emerging economies over the period of 1995–2009. Our main result is that a sovereign ceiling continues to affect the rating of corporations. The results also suggest that the influence of a sovereign ceiling on corporate ratings remains particularly significant in countries where capital account restrictions are still in place and with high political risk.
ISSN:0378-4266
1872-6372
DOI:10.1016/j.jbankfin.2013.07.006