Solicited and Unsolicited Credit Ratings: A Global Perspective

Winnie P. H. Poon and Kam C. Chan
Additional contact information
Winnie P. H. Poon: Asian Development Bank Institute

Finance Working Papers from East Asian Bureau of Economic Research

Abstract: We conducted a global study of the long-term issuer ratings of nonfinancial firms from Standard and Poor's Ratings Services (S&P) for the period 19982003. Specifically, we focused on the solicited versus unsolicited ratings and sample-selection bias in the analysis. Unlike the literature, we adopted an improved method using Wooldridges instrumental-variable approach to mitigate the concern of specification errors in Heckmans model. We found that the probability of seeking a long-term issuer rating is positively related to the size and profitability of the firm, and negatively related to the growth opportunities and debt levels of the firm. The credit rating is positively related to the sovereign rating, size, and profitability of the issuer, and negatively related to the debt ratio of the issuer. Consistent with the literature, we found sample-selection bias in credit ratings. Our findings suggest that the firms with solicited ratings seem to be more profitable, more liquid, and have lower leverage than the issuers with unsolicited ratings. After controlling for sample-selection bias and some key financial ratios, we found that unsolicited firms, on average, seem to have lower long-term issuer ratings.

Keywords: issuer ratings; solicited ratings; unsolicited ratings (search for similar items in EconPapers)
JEL-codes: D53 G15 G24 (search for similar items in EconPapers)
Date: 2010-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.eaber.org/node/22815 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 301 [REDIRECT LOOP] Moved Permanently (http://www.eaber.org/node/22815 [301 Moved Permanently]--> https://www.eaber.org/node/22815 [301 Moved Permanently]--> https://www.eaber.org/node/22815 [301 Moved Permanently]--> https://www.eaber.org/node/22815 [301 Moved Permanently]--> https://www.eaber.org/node/22815 [301 Moved Permanently]--> https://www.eaber.org/node/22815 [301 Moved Permanently]--> https://www.eaber.org/node/22815 [301 Moved Permanently]--> https://www.eaber.org/node/22815)

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: https://EconPapers.repec.org/RePEc:eab:financ:22815

Access Statistics for this paper

More papers in Finance Working Papers from East Asian Bureau of Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Shiro Armstrong (shiro.armstrong@anu.edu.au).