Does sovereign creditworthiness affect bank valuations in emerging markets?

Williams, G. and Alsakka, R. and Ap Gwilym, O. (2015) Does sovereign creditworthiness affect bank valuations in emerging markets? Journal of International Financial Markets, Institutions and Money, 36. pp. 113-129. DOI: 10.1016/j.intfin.2015.02.001

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We analyse the impact of sovereign rating actions by S&P, Moody's and Fitch on bank valuations in emerging markets. We find strong evidence of a rating channel for the transmission of sovereign risk to bank valuations. Collateral and guarantee channels play modest roles, but are more relevant to countries that experienced positive actions. Positive sovereign actions by S&P have the strongest impact on bank valuations. Both negative and positive new rating information, outlook and watch actions are associated with strong market impact. The findings identify clear evidence of links between emerging market governments� external credit standing and banks� market valuation.

Item Type: Article
Subjects: Research Publications
Departments: College of Business, Law, Education and Social Sciences > Bangor Business School
Date Deposited: 20 May 2015 02:49
Last Modified: 10 Feb 2016 03:33
ISSN: 1042-4431
URI: http://e.bangor.ac.uk/id/eprint/4565
Identification Number: DOI: 10.1016/j.intfin.2015.02.001
Publisher: Elsevier
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