Title
Are unsolicited credit ratings lower? International evidence from bank ratings
Document Type
Journal article
Source Publication
Journal of Business Finance & Accounting
Publication Date
11-2005
Volume
32
Issue
9-10
First Page
1741
Last Page
1771
Keywords
unsolicited bank ratings, bank ratings, rating determinants
Abstract
In recent years credit rating agencies have started rating firms who have not asked for a rating. Recipients of unsolicited ratings argue that the assigned ratings are too low and reflect a lack of comprehensive knowledge of the rated firms. We set out to examine these claims using a comprehensive and international sample of 1,060 bank ratings. Our results show that there is a significant difference in the distributions of ratings, and the shadow group has lower ratings. The results also indicate that banks that received shadow ratings are smaller and have weaker financial profiles than banks that have other ratings. This explains, in part, the lower ratings. In addition, we develop a model to explain bank ratings. The two-step treatment effects model shows that bank size, profitability, asset quality, liquidity, and sovereign credit risk are important factors in determining bank ratings.
DOI
10.1111/j.0306-686X.2005.00646.x
Print ISSN
14685957
Publisher Statement
Copyright © Blackwell Publishing Ltd. 2005
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Poon, W. P. H., & Firth, M. (2005). Are unsolicited credit ratings lower? International evidence from bank ratings. Journal of Business Finance & Accounting, 32(9-10), 1741–1771. doi: 10.1111/j.0306-686X.2005.00646.x
