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The impact of sovereign rating actions on bank ratings in emerging markets

Williams, G. and Alsakka, R. and Ap Gwilym, O. (2013) The impact of sovereign rating actions on bank ratings in emerging markets. Journal of Banking & Finance, 37 ((2)). pp. 563-577. DOI: 10.1016/j.jbankfin.2012.09.021

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Abstract

This paper analyses the effects of sovereign rating actions on the credit ratings of banks in emerging markets, using a sample from three global rating agencies across 54 countries for 1999�2009. Despite widespread attention to sovereign ratings and bank ratings, no previous study has investigated the link in this manner. We find that sovereign rating upgrades (downgrades) have strong effects on bank rating upgrades (downgrades). The impact of sovereign watch status on bank rating actions is much weaker and often insignificant. The sensitivity of banks� ratings to sovereign rating actions is affected by the countries� economic and financial freedom and by macroeconomic conditions. Ratings of banks with different ownership structures are all influenced strongly by the sovereign rating, with some variation depending on the countries� characteristics. Emerging market bank ratings are less likely to follow sovereign rating downgrades during the recent financial crisis period.

Item Type: Article
Subjects: Research Publications
Departments: College of Business, Law, Education and Social Sciences > Bangor Business School
Date Deposited: 09 Dec 2014 16:45
Last Modified: 23 Sep 2015 03:08
ISSN: 0378-4266
URI: http://e.bangor.ac.uk/id/eprint/988
Identification Number: DOI: 10.1016/j.jbankfin.2012.09.021
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