Economics at your fingertips  

How do sovereign credit rating changes affect private investment?

Sheng-Syan Chen, Hsien-Yi Chen, Chong-Chuo Chang and Shu-Ling Yang

Journal of Banking & Finance, 2013, vol. 37, issue 12, 4820-4833

Abstract: Sovereign credit rating changes have an influence on real private investment of re-rated countries. We find significant increases in private investment growth following upgrades in sovereign ratings. These increases, however, are transitory. We also find significant, temporary declines in private investment growth following sovereign rating downgrades. The results hold after accounting for re-rated countries’ growth opportunities, endogeneity, and other factors that could affect private investment. The irreversible nature of investment may be the explanation for the temporary changes in the growth rates of physical capital investment associated with revisions in sovereign credit ratings.

Keywords: Sovereign credit rating; Private investment; Irreversible investment (search for similar items in EconPapers)
JEL-codes: F21 F34 G11 G24 H63 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

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:

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-03-31
Handle: RePEc:eee:jbfina:v:37:y:2013:i:12:p:4820-4833