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

Eduardo Borensztein, Kevin Cowan () and Patricio Valenzuela

Journal of Banking & Finance, 2013, vol. 37, issue 11, 4014-4024

Abstract: 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.

Keywords: Credit risk; Sovereign risk; Credit ratings; Sovereign ceiling (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (90)

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Related works:
Working Paper: Sovereign Ceilings "Lite"? The Impact of Sovereign Ratings on Corporate Ratings (2013)
Working Paper: Sovereign Ceilings “Lite”? The Impact of Sovereign Ratings on Corporate Ratings (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:11:p:4014-4024

DOI: 10.1016/j.jbankfin.2013.07.006

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