Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/21363
Title: Are unsolicited credit ratings lower? International evidence from bank ratings
Authors: Poon, WPH
Firth, M
Keywords: Bank ratings
Rating determinants
Unsolicited bank ratings
Issue Date: 2005
Publisher: Wiley-Blackwell
Source: Journal of business finance and accounting, 2005, v. 32, no. 9-10, p. 1741-1771 How to cite?
Journal: Journal of business finance and accounting 
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.
URI: http://hdl.handle.net/10397/21363
ISSN: 0306-686X
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