Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Deze masterproef onderzoekt de invloed van credit downgrades uitgegeven door kredietbeoordelaars, zoals Moody's, Fitch en S&P, op de Europese obligatiemarkt. De focus ligt voornamelijk op het concept van financiële besmetting. Aan de hand van een algemene regressie wordt de invloed van een negatieve kredietscore op de nationale obligatiemarkt onderzocht. Vervolgens wordt via een event study de invloed van diezelfde kredietwijziging aangetoond op de volledige Europese obligatiemarkt. Het eindresultaat bleek significant. Door de recente politieke en financiële eenmaking in Europa worden nationale schokken inderdaad doorgegeven aan andere lidstaten waarop de schok de facto niet van toepassing is. Er is sprake van financiële besmetting op de Europese obligatiemarkt.

Credit rating changes. --- Economische systemen. --- Sovereign bond yield spread. --- Sovereign debt crisis. --- Spillover effects.

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Since the beginning of the 21st century, most financial instruments have become increasingly complex. Consequently, investors without any particular knowledge or experience in the finance area encounter some difficulties in making the right investment decisions. To address this issue, credit rating agencies (CRAs, for short) assess the creditworthiness (or ability to meet financial obligations) of issuers or securities by determining a rating in the form of a letter grade. However, since every institution possesses its own methodology, divergences in opinion (also called “split ratings”) can arise. The aim of this dissertation is therefore to evaluate the impact of the financial and accounting characteristics of the companies rated on the occurrence of such split ratings. 
Firstly, this paper describes the context in which CRAs operate and defines related concepts such as credit risk, rating migration (or transition) and so on. Also, the two institutions chosen for the purposes of this study (Standard & Poor’s and Moody’s) are presented in more details with the potential differences in methodology and in interpretation of ratings. Then, an empirical study is realized on a sample composed of 134 companies of the STOXX® Europe 600 index for which the necessary financial characteristics and long-term issuers ratings are available. Econometrics models are employed thereafter and a comparison is made in order to answer the research question of this dissertation.
Finally, the results of the different models have shown that the occurrence of split ratings is indeed impacted by some business-related characteristics. By way of introduction, it was discovered that Standard & Poor’s was more influenced by the leverage while Moody’s takes rather the total revenue into account. Most importantly, the outcomes of the study proved that the net income, total assets, current assets, market capitalization and liquidity affected the probability of split ratings. The most striking finding was that the occurrence of split ratings was substantially higher for banks than for other companies. Nonetheless, the realization of this study has highlighted some limitations and inconsistencies that require further research.

Credit rating agencies --- Split ratings --- Financial characteristics --- Rating --- Sciences économiques & de gestion > Finance

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

This paper explores bond-level, issuer-level, and macro-level conditions that affect the distance between sovereign credit rating and sub-sovereign debt ratings. Over three-quarters of rated foreign-currency sub-sovereign bonds issued during 1990-2013 in 47 emerging and developing countries were rated at or below the corresponding sovereign rating, thus confirming the prevalence of a sovereign ceiling. For bonds rated below the sovereign ceiling, a Tobit regression shows strong sovereign-corporate links for financial firms, publicly-owned firms, and local government entities. International bonds tend to be rated closer to the sovereign rating during riskier global financial conditions. Well-developed domestic financial markets also tend to be related to a smaller distance, likely because of stronger macro-financial links for financial issuers. About 11 to 26 percent of the bonds had ratings higher than the sovereign rating, which was achieved mainly through securitization structures. This observation is confirmed using a double-hurdle estimation that accounts for bond and firm characteristics and macroeconomic conditions. The sovereign-corporate rating relationship became significantly stronger at the peak period of the 2008-09 global financial crisis, and appears to have weakened in the subsequent years.

Fixed Income Securities --- Global Financial Crisis --- International Debt Markets --- Sovereign Ceiling Violation --- Sovereign Credit Rating --- Spillover Effect --- Sub-Sovereign Rating

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

This paper examines the influence of sovereign credit ratings and relative risk ratings on private capital flows to 26 emerging and frontier market economies, using quarterly data for 1998-2017. A dynamic panel regression model is used to estimate the relationship between ratings and capital flows after controlling for other factors that can influence capital flows, such as growth and interest rate differentials and global risk conditions. The analysis finds that while absolute ratings were an important determinant of net capital inflows prior to the global financial crisis in 2008, the influence of relative risk ratings increased in the post-crisis period, which was characterized by easy monetary policies and global liquidity, on the one hand, and greater caution and discretion on the part of investors on the other. The post-crisis effect of relative ratings appears to be driven mostly by portfolio flows. These findings imply that emerging and frontier markets need to pay greater attention to their relative economic performance and not just their sovereign ratings. Tracking changes in relative ratings could help predict macroeconomic disturbances resulting from volatile portfolio capital movements.

Capital Flows --- Capital Markets and Capital Flows --- Debt Markets --- Emerging Market Economies --- Emerging Markets --- External Debt --- Frontier Markets --- Private Capital Flows --- Sovereign Bond Market --- Sovereign Credit Rating

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

This paper discusses the key regulatory, market and political failures that led to the 2008-2009 United States financial crisis. While Congress was fixing the Savings and Loan crisis, it failed to give the regulator of Fannie Mae and Freddie Mac normal bank supervisory power. This was a political failure as Congress was appealing to narrow constituencies. In the mid-1990s, to encourage home ownership, the Administration changed enforcement of the Community Reinvestment Act, effectively requiring banks to lower bank mortgage standards to underserved areas. Crucially, the risky mortgage standards then spread to other sectors of the market. Market failure problems ensued as banks, mortgage brokers, securitizers, credit rating agencies, and asset managers were all plagued by problems such as moral hazard or conflicts of interest. The author explains that financial deregulation of the past three decades is unrelated to the financial crisis, and makes several recommendations for regulatory reform.

Access to Finance --- Asset managers --- Bankruptcy and Resolution of Financial Distress --- Banks & Banking Reform --- Brokers --- Conflicts of interest --- Credit rating --- Credit rating agencies --- Debt Markets --- Developing countries --- Emerging Markets --- Federal Reserve --- Finance and Financial Sector Development --- Financial Crisis --- Financial institutions --- Home mortgages --- Home ownership --- International Bank --- Loan --- Market failure --- Market Failures --- Moral hazard --- Mortgage --- Political economy --- Private Sector Development --- Reinvestment --- Supervisory power