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Title: Split sovereign credit ratings : the causes and implications for the financial markets
Author: Vu, Huong Thi
ISNI:       0000 0004 5349 9298
Awarding Body: Prifysgol Bangor University
Current Institution: Bangor University
Date of Award: 2014
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This thesis addresses two original research questions on split sovereign credit ratings. First, what factors drive split sovereign ratings? Second, how do split sovereign ratings influence the information content of sovereign rating events for the bond and stock markets? A rich daily dataset from 1997-2013 for 86 countries and three global credit rating agencies (CRAs) is utilised. Split sovereign credit ratings are determined by two elements: the differences in the CRAs’ credit rating methodologies and the sovereign information transparency. Judgements of political risk divide the CRAs’ opinions more than economic fundamentals. Split ratings are induced by increases in political risk and Fitch’s ratings are most negatively impacted by this. Information transparency enhances the quality of ratings, leading to higher ratings by Moody’s versus S&P and Fitch. Opacity results in disagreements between Fitch and S&P, S&P having the tendency to assign lower ratings. On the other hand, government transparency reduces the division between them. Pre-event differences of opinion between S&P and Moody’s determine the extent to which bond spreads react to rating actions. Sovereign bond investors are more pessimistic about downgrades by S&P on the inferior ratings (lower ratings by S&P versus Moody’s immediately pre-event) than on the superior ratings (higher ratings by S&P versus Moody’s immediately pre-event). Upgrades by Moody’s have a positive market impact if the upgrades affect the superior ratings (higher ratings by Moody’s versus S&P). For the stock market, the differences of opinions between all three CRAs influence stock price reactions. Stock markets demonstrate similar asymmetric reactions to those reported for bond markets.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available