Examining the Behavior of Credit Rating Agencies Post 2008 Economic Turmoil
Journal Title: International Journal of Management and Economics - Year 2017, Vol 53, Issue 4
Abstract
The demand for sovereign ratings has increased throughout last decades. Until the1990’s, credit rating agencies (CRAs) did not rate most of the emerging markets and the focus was almost only on developed countries, however, during this decade the number of sovereigns rated increased dramatically due to addition of emerging markets to the portfolio. The global financial crisis in 2008 led to the loss of credibility of these major credit rating companies. None of these three agencies showed any signal of macroeconomic problems in countries where the financial crisis created devastating macroeconomic results. It is believed that this failure has led credit rating agencies to behave more conservatively. This paper aims to determine whether CRAs tend to behave conservatively after the 2008 global financial crisis. If the downgrading is greater than the worsening of the economic situation in the given economies, then we can infer that CRAs tend to behave more conservatively. The good working model in estimating ratings assigned by CRAs before the crisis failed to estimate the ratings after 2008 crisis. This may have happened due to two reasons. First, as experienced in the aftermath of the former crisis, credit rating agencies may have added new macroeconomic variables in the process of assigning ratings or change the weight assigned to the already existing macroeconomic variables. Second, it is a known fact that ratings emerge from the combination of two distinct information; the quantitative part reflected by macroeconomic indicators and the qualitative judgements of the agency about the sovereign.
Authors and Affiliations
Çağrı L. Uslu
Keywords
Related Articles
- EP ID EP302960
- DOI 10.1515/ijme-2017-0026
- Views 71
- Downloads 0
The Analysis of Institutional Environment in the Area of Product Market Competition in the New EU Member States: What Do the Data Say About the Models of Capitalism Emerging in the CEE Countries?
The paper analyzes the institutional architecture and the effects of product market competition in 11 countries of Central and Eastern Europe (CEE). The aim of the research was to find out how similar or dissimilar are t...
Collection Dilemmas and Performance Measures of the Value-Added Tax in Germany and Poland
In the European Union Member States, value-added tax (VAT) is undergoing a continuous process of harmonization, which was initiated in the 1960s by the introduction of the First and Second Council Directives and which re...
Organisational-Level Attributes of Micro-Multinationals. The Evidence From European SMEs
This paper investigates organisational-level attributes that allow European SMEs to choose equity-based modes of entry to foreign markets, thus becoming micro-multinationals. We hypothesize that international R&D coopera...
Sustainability-oriented cross-functional collaboration to manage trade-offs and interdependencies
Despite a consensus view in the literature about the importance of cross-functional collaboration (CFC) for corporate environmental performance improvement, there is a dearth of studies that explain how exactly sustainab...
Value Creation by Support Organizations Through the Prism of Conflicting Institutional Logics
The article sets out to explore how conflicting institutional logics of support organizations influence their value creation. Value creation undertaken by support organizations does not directly reflect their missions. E...