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Credit rating model development: An ordered analysis based on accounting data

Dimitris Balios, Stavros Thomadakis and Lena Tsipouri ()

Research in International Business and Finance, 2016, vol. 38, issue C, 122-136

Abstract: In this paper we propose and test a methodology for constructing a credit rating model. We follow a polytomous ordered probit analysis leading to the specification of statistically significant credit rating intervals. We test our model with accounting data of Greek listed firms over the years 2004–2013, a period which includes both the pre-crisis growth and the crisis phase of the Greek economy and the stock market. Using the empirically—based rating categories that the model generates endogenously, we observe not only a clear and timely response of ratings to the changing economic environment, but we also obtain significant predictive ability over a period of one, two and three years.

JEL-codes: G01 G24 G33 M49 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1016/j.ribaf.2016.03.011

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