The Impact of Sovereign Credit Ratings on Voters’ Preferences

Research output: Contribution to journalArticlepeer-review

Standard Standard

The Impact of Sovereign Credit Ratings on Voters’ Preferences. / Lam Thy Nguyen, Phuc ; Alsakka, Rasha; Mantovan, Noemi .
In: Journal of Banking and Finance, Vol. 154, 106938, 09.2023.

Research output: Contribution to journalArticlepeer-review

HarvardHarvard

Lam Thy Nguyen, P, Alsakka, R & Mantovan, N 2023, 'The Impact of Sovereign Credit Ratings on Voters’ Preferences', Journal of Banking and Finance, vol. 154, 106938. https://doi.org/10.1016/j.jbankfin.2023.106938

APA

Lam Thy Nguyen, P., Alsakka, R., & Mantovan, N. (2023). The Impact of Sovereign Credit Ratings on Voters’ Preferences. Journal of Banking and Finance, 154, Article 106938. https://doi.org/10.1016/j.jbankfin.2023.106938

CBE

Lam Thy Nguyen P, Alsakka R, Mantovan N. 2023. The Impact of Sovereign Credit Ratings on Voters’ Preferences. Journal of Banking and Finance. 154:Article 106938. https://doi.org/10.1016/j.jbankfin.2023.106938

MLA

Lam Thy Nguyen, Phuc , Rasha Alsakka and Noemi Mantovan. "The Impact of Sovereign Credit Ratings on Voters’ Preferences". Journal of Banking and Finance. 2023. 154. https://doi.org/10.1016/j.jbankfin.2023.106938

VancouverVancouver

Lam Thy Nguyen P, Alsakka R, Mantovan N. The Impact of Sovereign Credit Ratings on Voters’ Preferences. Journal of Banking and Finance. 2023 Sept;154:106938. Epub 2023 Jun 19. doi: 10.1016/j.jbankfin.2023.106938

Author

Lam Thy Nguyen, Phuc ; Alsakka, Rasha ; Mantovan, Noemi . / The Impact of Sovereign Credit Ratings on Voters’ Preferences. In: Journal of Banking and Finance. 2023 ; Vol. 154.

RIS

TY - JOUR

T1 - The Impact of Sovereign Credit Ratings on Voters’ Preferences

AU - Lam Thy Nguyen, Phuc

AU - Alsakka, Rasha

AU - Mantovan, Noemi

PY - 2023/9

Y1 - 2023/9

N2 - We investigate the political power of credit rating agencies by building a theoretical model that illustrates how heterogeneous voters change their political preferences after receiving credit signals which infer the quality of their governments. We empirically test this hypothesis using a rich dataset of daily sovereign ratings, outlook and watch signals assigned by S&P, Moody’s and Fitch to EU countries from 2000 to 2017, along with a unique dataset measuring public support for governments. We find that negative rating signals lead to a significant decrease in government support, therefore influencing the electoral prospects of political parties. Both sociotropic and egocentric voters’ preferences are affected by sovereign ratings. Our results are confirmed across a battery of robustness tests and various modelling approaches, including fixed effects and difference in differences models and propensity score matching. Our findings offer wide-ranging implications for policy makers, political parties, governments, and the rating industry.

AB - We investigate the political power of credit rating agencies by building a theoretical model that illustrates how heterogeneous voters change their political preferences after receiving credit signals which infer the quality of their governments. We empirically test this hypothesis using a rich dataset of daily sovereign ratings, outlook and watch signals assigned by S&P, Moody’s and Fitch to EU countries from 2000 to 2017, along with a unique dataset measuring public support for governments. We find that negative rating signals lead to a significant decrease in government support, therefore influencing the electoral prospects of political parties. Both sociotropic and egocentric voters’ preferences are affected by sovereign ratings. Our results are confirmed across a battery of robustness tests and various modelling approaches, including fixed effects and difference in differences models and propensity score matching. Our findings offer wide-ranging implications for policy makers, political parties, governments, and the rating industry.

U2 - 10.1016/j.jbankfin.2023.106938

DO - 10.1016/j.jbankfin.2023.106938

M3 - Article

VL - 154

JO - Journal of Banking and Finance

JF - Journal of Banking and Finance

SN - 0378-4266

M1 - 106938

ER -