An analysis of the determinants of S&P ratings assigned to Canadian firms: Application of a multinomial logit

Walid Amdouni and Issouf Soumaré

Journal of Risk Management in Financial Institutions, 2014, vol. 7, issue 4, 353-369

Abstract: This study identifies the factors affecting the ratings assigned to Canadian firms by the rating agency Standard and Poor's, and proposes a multinomial logit model to predict ratings. The authors first propose a two-class model that classifies ratings as either investment or speculative grade. They then extend this model to account for all the rating levels used by the rating agency. The out-of-sample forecasts respectively lead to concordance rates of 86 per cent and 60 per cent in the two-class and extended models. The credit rating models thus capture to some extent the main determinants affecting the ratings changes.

Keywords: ratings; bankruptcy; credit risk; multinomial logit (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:aza:rmfi00:y:2014:v:7:i:4:p:353-369

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