Does competition improve sovereign credit rating quality?  

Research output: Contribution to journal › Article › peer-review

Standard Standard

Does competition improve sovereign credit rating quality?  . / Vu, Huong; Alsakka, Rasha ; ap Gwilym, Owain.
In: Journal of International Financial Markets, Institutions and Money, Vol. 76, 101478, 01.2022.

Research output: Contribution to journal › Article › peer-review

HarvardHarvard

Vu, H, Alsakka, R & ap Gwilym, O 2022, 'Does competition improve sovereign credit rating quality?  ', Journal of International Financial Markets, Institutions and Money, vol. 76, 101478. https://doi.org/10.1016/j.intfin.2021.101478

APA

Vu, H., Alsakka, R., & ap Gwilym, O. (2022). Does competition improve sovereign credit rating quality?  . Journal of International Financial Markets, Institutions and Money, 76, Article 101478. https://doi.org/10.1016/j.intfin.2021.101478

CBE

Vu H, Alsakka R , ap Gwilym O. 2022. Does competition improve sovereign credit rating quality?  . Journal of International Financial Markets, Institutions and Money. 76:Article 101478. https://doi.org/10.1016/j.intfin.2021.101478

MLA

Vu, Huong, Rasha Alsakka, and Owain ap Gwilym. "Does competition improve sovereign credit rating quality?  ". Journal of International Financial Markets, Institutions and Money. 2022. 76. https://doi.org/10.1016/j.intfin.2021.101478

VancouverVancouver

Vu H, Alsakka R , ap Gwilym O. Does competition improve sovereign credit rating quality?  . Journal of International Financial Markets, Institutions and Money. 2022 Jan;76:101478. Epub 2021 Nov 24. doi: 10.1016/j.intfin.2021.101478

Author

Vu, Huong ; Alsakka, Rasha ; ap Gwilym, Owain. / Does competition improve sovereign credit rating quality?  . In: Journal of International Financial Markets, Institutions and Money. 2022 ; Vol. 76.

RIS

TY - JOUR

T1 - Does competition improve sovereign credit rating quality?  

AU - Vu, Huong

AU - Alsakka, Rasha

AU - ap Gwilym, Owain

N1 - No Prerequisite Funders thus 24 month embargo

PY - 2022/1

Y1 - 2022/1

N2 - The market for sovereign ratings has been dominated by two agencies but credible new entrants have emerged. Decreasing market concentration has potentially significant implications for the quality of sovereign ratings. Using a global dataset from S&P, Moody’s, Fitch and DBRS for 2000-2016, we find that S&P and Moody’s ratings are higher (lower) in periods following increases in Fitch (DBRS) market share. Evidence suggests that DBRS employs a relatively lenient rating policy to proceed in this market but increased regulatory pressure on rating agencies weakens any tendency to inflate ratings to gain market share. We also find that sovereign rating strategies vary across the economic cycle. Our findings offer wide-ranging implications for market participants, policy makers and the rating industry.

AB - The market for sovereign ratings has been dominated by two agencies but credible new entrants have emerged. Decreasing market concentration has potentially significant implications for the quality of sovereign ratings. Using a global dataset from S&P, Moody’s, Fitch and DBRS for 2000-2016, we find that S&P and Moody’s ratings are higher (lower) in periods following increases in Fitch (DBRS) market share. Evidence suggests that DBRS employs a relatively lenient rating policy to proceed in this market but increased regulatory pressure on rating agencies weakens any tendency to inflate ratings to gain market share. We also find that sovereign rating strategies vary across the economic cycle. Our findings offer wide-ranging implications for market participants, policy makers and the rating industry.

KW - Sovereign rating quality

KW - Competition

KW - Catering

KW - Reputation

U2 - 10.1016/j.intfin.2021.101478

DO - 10.1016/j.intfin.2021.101478

M3 - Article

VL - 76

JO - Journal of International Financial Markets, Institutions and Money

JF - Journal of International Financial Markets, Institutions and Money

SN - 1042-4431

M1 - 101478

ER -