IDEAS home Printed from https://ideas.repec.org/a/taf/apfiec/v19y2009i3p213-225.html
   My bibliography  Save this article

Changing credit rating standards in the UK: empirical evidence from 1999 to 2004

Author

Listed:
  • Eleimon Gonis
  • Peter Taylor

Abstract

In recent years, the number of downgrades in UK corporate credit ratings has exceeded the number of upgrades, leading some to conclude that the credit quality of UK companies has deteriorated. However, another explanation is that the credit rating agencies have become more stringent in the credit rating process. Summary statistics, a transition matrix and an ordered probit analysis of 69 UK credit rated firms for the years 1999-2004 suggests that the evidence supports both the explanations. In addition, the analysis shows that there is a clear pattern of UK credit ratings converging towards the investment-grade threshold category (BBB).

Suggested Citation

  • Eleimon Gonis & Peter Taylor, 2009. "Changing credit rating standards in the UK: empirical evidence from 1999 to 2004," Applied Financial Economics, Taylor & Francis Journals, vol. 19(3), pages 213-225.
    • Handle: RePEc:taf:apfiec:v:19:y:2009:i:3:p:213-225
    DOI: 10.1080/09603100802298018
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/09603100802298018
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/09603100802298018?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. ., 2004. "Market dynamics associated with credit ratings: a literature review," Financial Stability Review, Banque de France, issue 4, pages 77-93, June.
    2. Gonzalez, F. & Haas, F. & Johannes, R. & Persson, M. & Toledo, L. & Violi, R. & Zins, C. & Wieland, M., 2004. "Market dynamics associated with credit ratings: a literature review," Financial Stability Review, Banque de France, issue 4, pages 53-76, June.
    3. Richard L. Johnson, 2003. "An examination of rating agencies' actions around the investment-grade boundary," Research Working Paper RWP 03-01, Federal Reserve Bank of Kansas City.
    4. Gonzalez, F. & Haas, F. & Johannes, R. & Persson, M. & Toledo, L. & Violi, R. & Zins, C. & Wieland, M., 2004. "Market dynamics associated with credit ratings: a literature review," Financial Stability Review, Banque de France, issue 4, pages 53-76, June.
    5. Lawrence J. White, 2001. "The Credit Rating Industry: An Industrial Organization Analysis," Working Papers 01-02, New York University, Leonard N. Stern School of Business, Department of Economics.
    6. C. H. Furfine & Jeffery D. Amato, 2003. "Are credit ratings procyclical?," BIS Working Papers 129, Bank for International Settlements.
    7. Stella Cheung, 1996. "Provincial Credit Rating in Canada: An Ordered Probit Analysis," Staff Working Papers 96-6, Bank of Canada.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Eleimon Gonis & Salima Paul & Jon Tucker, 2012. "Rating or no rating? That is the question: an empirical examination of UK companies," The European Journal of Finance, Taylor & Francis Journals, vol. 18(8), pages 709-735, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eleimon Gonis & Salima Paul & Jon Tucker, 2012. "Rating or no rating? That is the question: an empirical examination of UK companies," The European Journal of Finance, Taylor & Francis Journals, vol. 18(8), pages 709-735, September.
    2. Reiner Martin & Moreno Roma & Isabel Vansteenkiste, 2005. "Regulatory reforms in selected EU network industries," Occasional Paper Series 28, European Central Bank.
    3. André Geis & Arnaud Mehl & Stefan Wredenborg, 2004. "The international role of the euro - evidence from bonds issued by non-euro area residents," Occasional Paper Series 18, European Central Bank.
    4. Adalbert Winkler & Roland Beck, 2006. "Macroeconomic and financial stability challenges for acceding and candidate countries," Occasional Paper Series 48, European Central Bank.
    5. Johannes Hörner & Nicolas S Lambert, 2021. "Motivational Ratings [Toward the Next Generation of Recommender Systems: A Survey of the State-of-the-Art and Possible Extensions]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(4), pages 1892-1935.
    6. Guido Wolswijk & Jakob de Haan, 2005. "Government debt management in the euro area - recent theoretical developments and changes in practices," Occasional Paper Series 25, European Central Bank.
    7. Antonio, DI Cesare, 2006. "Do Market‐based Indicators Anticipate Rating Agencies? Evidence for International Banks," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 35(1), pages 121-150, February.
    8. Daniela Russo & Terry L. Hart & Chryssa Papathanassiou, 2004. "Governance of securities clearing and settlement systems," Occasional Paper Series 21, European Central Bank.
    9. Duff, Angus & Einig, Sandra, 2009. "Credit ratings quality: The perceptions of market participants and other interested parties," The British Accounting Review, Elsevier, vol. 41(3), pages 141-153.
    10. Jesper Berg & Annalisa Ferrando & Gabe de Bondt & Silvia Scopel, 2005. "The bank lending survey for the euro area," Occasional Paper Series 23, European Central Bank.
    11. Reinhard Petschnigg, 2005. "The institutional framework for financial market policy in the USA seen from an EU perspective," Occasional Paper Series 35, European Central Bank.
    12. Agoraki, Maria-Eleni & Gounopoulos, Dimitrios & Kouretas, Georgios P., 2021. "Market expectations and the impact of credit rating on the IPOs of U.S. banks," Journal of Economic Behavior & Organization, Elsevier, vol. 189(C), pages 587-610.
    13. Mizen, Paul & Tsoukas, Serafeim, 2012. "Forecasting US bond default ratings allowing for previous and initial state dependence in an ordered probit model," International Journal of Forecasting, Elsevier, vol. 28(1), pages 273-287.
    14. Karl Whelan & Filippo Altissimo & Evaggelia Georgiou & Teresa Sastre & Maria Teresa Valderrama & Gabriel Sterne & Marc Stocker & Mark Weth & Alpo Willman, 2005. "Wealth and asset price effects on economic activity," Open Access publications 10197/210, School of Economics, University College Dublin.
    15. Krishna Reddy & Rudi Bosman & Nawazish Mirza, 2019. "Impact Of Credit Ratings On Stock Returns," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 21(3), pages 343-366, January.
    16. Henrik Enderlein & Johannes Lindner & Oscar Calvo-Gonzalez & Raymond Ritter, 2005. "The EU budget – how much scope for institutional reform?," Public Economics 0509005, EconWPA.
    17. Mattarocci, Gianluca, 2005. "Il rapporto tra impresa e agenzia di rating: la soluzione del multi-rating," MPRA Paper 4295, University Library of Munich, Germany, revised Mar 2005.
    18. Maria Gabriella Briotti, 2005. "Economic reactions to public finance consolidation - a survey of the literature," Occasional Paper Series 38, European Central Bank.
    19. Alessandro Bitetto & Paola Cerchiello & Stefano Filomeni & Alessandra Tanda & Barbara Tarantino, 2021. "Machine Learning and Credit Risk: Empirical Evidence from SMEs," DEM Working Papers Series 201, University of Pavia, Department of Economics and Management.
    20. Ferri, Giovanni & Lacitignola, Punziana & Lee, Jeong Yeon, 2013. "Foreign ownership and the credibility of national rating agencies: Evidence from Korea," Journal of Comparative Economics, Elsevier, vol. 41(3), pages 762-776.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:apfiec:v:19:y:2009:i:3:p:213-225. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAFE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.