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Sovereign Ceilings “Lite”? The Impact of Sovereign Ratings on Corporate Ratings in Emerging Market Economies
Author:
Mr. Eduardo Borensztein
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Mr. Patricio A Valenzuela
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Kevin Cowan null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2007: Issue 075
Language:
English
Publication Date:
01 Apr 2007
DOI:
https://doi.org/10.5089/9781451866391.001
ISBN:
9781451866391
ISSN:
1018-5941
Pages:
32
Keywords:
WP; private sector; sovereign rating; rating agency; retained earnings; working capital
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Although credit rating agencies have gradually moved away from a policy of never rating a private borrower above the sovereign (the "sovereign ceiling") it appears that sovereign ratings remain a significant determinant of the credit rating assigned to corporations. We examine this link using data for advanced and emerging economies over the past decade and conclude that the sovereign ratings have a significant and robust effect on private ratings even after controlling for country specific macroeconomic conditions and firm-level performance indicators. This suggests that public debt management affects the private sector through a channel that had not been previously recognized.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund