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How to Bring Pakistani Credit Rating Agencies at Part with Foreign Credit Agencies

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  • Ali, Imran

Abstract

Credit rating is a measure of an issuer to meet its commitment to pay all promised interest and principal amounts in full and on time. Borrowers are rated by credit rating agencies according to the borrower's credit-worthiness or risk profile. Credit ratings are expressed as letter grades such as A-, B, or C+. These ratings are based on various factors such as a borrower's payment history, foreclosures, bankruptcies and charge-offs. There is no exact science to rating a borrower's credit, and different lenders may assign different grades to the same borrower. In Pakistan two local credit rating companies are operating. One is JCR-VIS (JCR-VIS is a joint venture between Japan Credit Rating Agency, Ltd. (JCR) - Japan's premier rating agency, and Vital Information Services (Pvt.) Limited (VIS) – Pakistan’s only data bank and financial research organization. And the other rating agency is PACRA “Pakistan Credit Rating Agencies Limited” these both rating agencies are approved by SECP and have licenses for their operations. In my project I have done research on credit rating companies working and the rules and regulations they are fallowing in their working. I have analyzed that these both companies are fallowing the international rules and procedures. And have the membership in ACRRA. ACRAA (the Association of Credit Rating Agencies in Asia) is an association formed by Asian credit rating agencies, and assisted by the Asian Development Bank. ACRAA has been set up to act as a forum for exchange of skills and ideas among rating agencies, and for the promotion of Best Practices and norms of conduct, thereby to aid in the development of Asia's financial markets. I have also met with some professional to get their views about the local credit rating agencies and I have analyzed some people are satisfy and some are not with their procedures. I have given some recommendation to improve the working of credit rating agencies on the basis of my analysis in chapter 5.

Suggested Citation

  • Ali, Imran, 2005. "How to Bring Pakistani Credit Rating Agencies at Part with Foreign Credit Agencies," MPRA Paper 116437, University Library of Munich, Germany, revised 17 Dec 2021.
    • Handle: RePEc:pra:mprapa:116437
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    References listed on IDEAS

    as
    1. Ahmad, Mashood & Ali, Syed Babar, 2008. "Technical Analysis in the Stock Markets of Pakistan: A Case of Commercial Banks," MPRA Paper 64521, University Library of Munich, Germany.
    2. Hussain, Zahir & Ali, Syed Babar, 2009. "Implementation of Operational Risk Regime: A Case of Commercial Banks in Pakistan," MPRA Paper 64469, University Library of Munich, Germany.
    3. Robert A. Jarrow & David Lando & Stuart M. Turnbull, 2008. "A Markov Model for the Term Structure of Credit Risk Spreads," World Scientific Book Chapters, in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 18, pages 411-453, World Scientific Publishing Co. Pte. Ltd..
    4. Robert A. Jarrow & Stuart M. Turnbull, 2008. "Pricing Derivatives on Financial Securities Subject to Credit Risk," World Scientific Book Chapters, in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 17, pages 377-409, World Scientific Publishing Co. Pte. Ltd..
    5. Syed Babar Ali & Manzoor A.Khalidi, 2020. "Valuation of Equity Securities, Private Firms, and Startups," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 16(1), pages 125-140.
    6. Merton, Robert C, 1974. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 29(2), pages 449-470, May.
    7. Rizvi, Aoun & Ali, Syed Babar, 2011. "Risk Taking Behavior of Investors of Pakistan," MPRA Paper 64342, University Library of Munich, Germany.
    8. Ahmad, Baseer & Ali, Syed Babar, 2012. "Do Individual Investors in Pakistan Prefer Dividends?," MPRA Paper 64205, University Library of Munich, Germany.
    9. Ali, Syed Babar, 2012. "Corporate Governance and Accounting Practices in Pakistan," MPRA Paper 64713, University Library of Munich, Germany.
    10. Ali Zaidi, Syed Najaf & Ali, Syed Babar, 2006. "Risk and Scope of Debit Check Card in Competitive Market of Pakistan," MPRA Paper 64456, University Library of Munich, Germany.
    11. Madan, Dilip & Unal, Haluk, 2000. "A Two-Factor Hazard Rate Model for Pricing Risky Debt and the Term Structure of Credit Spreads," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(1), pages 43-65, March.
    12. Syed Babar Ali & Manzoor A.Khalidi, 2020. "Valuation of Equity Securities, Private Firms, and Startups," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 16(1), pages 16-19.
    13. Ali, Madiha & Ali, Syed Babar, 2014. "The Impact of Working Capital Management on Firm Profitability and Fixed Investment in Pakistan," MPRA Paper 64520, University Library of Munich, Germany.
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    More about this item

    Keywords

    Credit Rating; Credit Rating Agencies;

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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