The Determinants of Credit Ratings: Australian Evidence

Stephen Gray, Alexsander Mirkovic and Vanitha Ragunathan
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Stephen Gray: UQ Business School, University of Queensland, Brisbane, QLD 4072.
Alexsander Mirkovic: UQ Business School, University of Queensland, Brisbane, QLD 4072.
Vanitha Ragunathan: UQ Business School, University of Queensland, Brisbane, QLD 4072.

Australian Journal of Management, 2006, vol. 31, issue 2, 333-354

Abstract: We examine the impact that various financial and industry variables have on credit ratings issued for Australian firms by Standard and Poor's. Our ordered probit model indicates that interest coverage and leverage ratios have the most pronounced effect on credit ratings. Profitability variables and industry concentration measures are also important. Financial variables are helpful in discriminating between A- and BBB-rated firms, but are less precise in separating AA- and A-rated firms. We also document a consistent trend towards lower ratings—the standard required to achieve a particular rating is increasing over time.

Keywords: CREDIT RATINGS; ORDERED PROBIT MODEL (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:31:y:2006:i:2:p:333-354

DOI: 10.1177/031289620603100208

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