Sovereign Ceilings 'Lite'? The Impact of Sovereign Ratings on Corporate Ratings in Emerging Market Economies

By E. Borensztein, Kevin Cowan, Patricio Valenzuela. Social Science Research Network, 2007

276 citations recorded by the source corpus.

Although credit rating agencies have gradually moved away from a policy of never rating a corporation above the sovereign (the ‘sovereign ceiling’), it appears that sovereign credit ratings remain a significant determinant of corporate credit ratings. We examine this link using data for advanced and emerging economies over the period of 1995–2009. Our main result is that a sovereign ceiling continues to affect the rating of corporations. The results also suggest that the influence of a sovereign ceiling on corporate ratings remains particularly significant in countries where capital account restrictions are still in place and with high political risk.

Subfields: Finance

View Paper: https://www.semanticscholar.org/paper/86bbd61869c54d9d16d4b905bccad085ee03e31b

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Citations in the corpus

• Sovereign and corporate credit risk: Evidence from the Eurozone (2015, background): “Consistently with this channel, Borensztein, Cowan, and Valenzuela (2013) document a larger impact of sovereign credit ratings on corporate credit ratings for firms in the non-tradable sector relative to those in the tradable sector.”
• Bank Ratings and Lending Supply: Evidence from Sovereign Downgrades (2016, unknown): “…1 While credit rating agencies have been gradually moving away from a policy of never rating a private issuer above the sovereign, sovereign ratings remain a significant determinant of corporate ratings (Borensztein, Cowan, and Valenzuela (2013)), and ratings that pierce the sovereign ceiling…”