The Sovereign Effect on Bank Credit Ratings

Yu-Li Huang () and Chung-Hua Shen ()

Journal of Financial Services Research, 2015, vol. 47, issue 3, 379 pages

Abstract: We investigate the effect of sovereign credit ratings on bank credit ratings, known as the sovereign effect. Our study differs from the literature in three respects. First, we examine whether bank ratings below, at, or above the sovereign ceiling impact the sovereign effect. We find that the sovereign effect holds in all cases. Next, we consider the asymmetric impact of the sovereign effect on bank ratings with or without the ceiling effect. We find that a downgrade exhibits a stronger sovereign effect than an upgrade. Third, we examine whether the asset deterioration or the stable foreign fund hypotheses are possible explanations for the sovereign effect. Our results support both hypotheses. Copyright Springer Science+Business Media New York 2015

Keywords: Sovereign credit rating; Bank credit rating; Sovereign ceiling; Asymmetric adjustment; G15; G21 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
http://hdl.handle.net/10.1007/s10693-014-0193-7 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:jfsres:v:47:y:2015:i:3:p:341-379

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10693

DOI: 10.1007/s10693-014-0193-7

Access Statistics for this article

Journal of Financial Services Research is currently edited by Haluk Unal

More articles in Journal of Financial Services Research from Springer, Western Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().