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Why they keep missing: An empirical investigation of sovereign bond ratings and their timing

Makram El‐Shagi and Gregor von Schweinitz
Authors registered in the RePEc Author Service: Makram El-Shagi

Scottish Journal of Political Economy, 2022, vol. 69, issue 2, 186-224

Abstract: Two contradictory strands of the rating literature criticize that rating agencies merely follow the market on the one hand, and emphasizing that rating changes affect capital movements on the other hand. Both focus on explaining rating levels rather than the timing of rating announcements. Contrarily, we explicitly differentiate between a decision to assess a country and the actual rating decision. We show that this differentiation significantly improves the estimation of the rating function. The three major rating agencies treat economic fundamentals similarly, while differing in their response to other factors such as strategic considerations. This reconciles the conflicting literature.

Date: 2022
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Scottish Journal of Political Economy is currently edited by Tim Barmby, Andrew Hughes-Hallett and Campbell Leith

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