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Sovereign credit rating: Evidence of bias against poor countries

Author

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  • Tennant, David F.
  • Tracey, Marlon R.
  • King, Damien W.

Abstract

We assess whether credit rating agencies limit poor countries’ sovereign credit ratings. Consistent with prior studies, our heterogeneous middle-inflated ordered probit model indicates a statistical bias stacked against poor countries whenever their fundamentals change. This is important, as second-generation crisis models suggest that such biases can have self-fulfilling consequences.

Suggested Citation

  • Tennant, David F. & Tracey, Marlon R. & King, Damien W., 2020. "Sovereign credit rating: Evidence of bias against poor countries," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    • Handle: RePEc:eee:ecofin:v:51:y:2020:i:c:s1062940818302158
    DOI: 10.1016/j.najef.2018.11.006
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    References listed on IDEAS

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    Cited by:

    1. Cuadros-Solas, Pedro Jesús & Salvador Muñoz, Carlos, 2022. "Disentangling the sources of sovereign rating adjustments: An examination of changes in rating policies following the GFC," Research in International Business and Finance, Elsevier, vol. 59(C).
    2. Ben Hmiden, Oussama & Tatoutchoup, Didier & Nguimkeu, Pierre & Avelé, Donatien, 2024. "Discrepancy and cross-regional bias in sovereign credit ratings: Analyzing the role of public debt," Economic Modelling, Elsevier, vol. 131(C).
    3. Colin Ellis, 2022. "Are Sovereign Ratings Biased Against Africa?," Applied Economics and Finance, Redfame publishing, vol. 9(1), pages 29-36, December.

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    More about this item

    Keywords

    Credit rating agencies; Sovereign debt; Developing countries;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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