Credit Rating Research Articles

An Empirical Analysis of the Effect of Multiple Credit Ratings on Reducing Asset Securitization Financing Costs

This paper delves into the correlation between multiple credit ratings and the financing costs associated with asset securitization, utilizing data spanning from 2012 to 2022 pertaining to credit, corporate asset-backed securities, and asset-backed notes. The research reveals that incorporating multiple credit ratings, as opposed to relying solely on a single rating, favorably impacts the accessibility of more favorable financing costs. Furthermore, the employment of both the "issuer pays" and "investor pays" rating models, as compared to utilizing just the "issuer pays" model, proves to be more effective in mitigating the financing costs of asset securitization products.

Informing Voters About Public Finance: Evidence from a Survey Experiment

This study investigates how information about municipal credit ratings influences voters' evaluations of incumbent mayors. Through an original survey experiment, we assess the impact of credit rating downgrades and crime rate increases on citizens' perceptions of mayoral performance. Our findings reveal that information on both issues significantly affects voters' evaluations, with negative news about public finance and crime rates leading to decreased support for incumbents. Notably, the effects of credit downgrades are nearly as substantial as those of crime increases despite public finance being a more complex and less salient issue. Additionally, we observe that voters with varying political knowledge respond similarly to changes in municipal credit ratings, suggesting that such information serves as a useful heuristic in local elections. Our study underscores the importance of accessible financial information in promoting accountability in local governance.

Systemic risk under different clearing methods for multiple derivatives

ABSTRACT The superposition of credit and interest rate derivatives brings liquidity and benefits to financial markets but may shock the system. Various clearing methods, including bilateral and CCP clearing, have emerged since the proposal of a mandatory clearing system. Previous research has focused on single derivatives, neglecting multiple derivatives. Thus, this paper constructs a banking network model incorporating two derivatives and investigates the banking systemic risk under two clearing methods: joint clearing in the same CCP and separate clearing in different CCPs. Results show that the systemic risk of joint clearing in the same CCP is lower than that of separate clearing in different CCPs. Increasing the central clearing ratio increases the systemic risk under separate clearing in different CCPs. The systemic risk is low when the central clearing ratios for credit derivatives and interest rate derivatives are similar under joint clearing in the same CCP approach. In addition, the systemic risk can be significantly underestimated by studying only one type of derivatives in the banking network. This paper not only provides theoretical support for the banking systemic risk under multiple derivatives clearing issues, but also offers strategic suggestions for regulators to clear derivatives reasonably and effectively.

Why consumers hesitate to pay online: Evidence from online transactions

Purchase intention and decision turn out to be the research hotspots in the field of consumer behavior, whereas the reasons for consumer hesitation before purchase have been scarcely investigated. In order to explore the factors that affect consumers’ online purchase hesitation in the context of e-commerce retail, this study uses the theory of perceived risk to analyze how different dimensions of perceived risk dominated by consumer trust affect consumers’ purchase hesitation at the checkout stage, examines the moderating effect of consumers’ online shopping experience on the influencing process, and builds a test model with moderating variables. In this study, the factors for purchase hesitation are empirically analyzed using the methods of literature analysis and logistic regression based on the real transaction data from Taobao. The results show that seller credit rating, representing seller risk, exerts a significant adverse effect on purchase hesitation, whereas the order amount (i.e. financial risk, and price dispersion, representing product risk) positively affects purchase hesitation. The consumer experience plays a moderating role in the above process. In addition, this article further explores the heterogeneous role of buyer’s device, seller’s platform, and buyer’s gender and excludes some of the interfering factors that lead to involuntary hesitation. JEL Classification: M31, M37

Capital market liberalization and corporate ESG rating divergence: a quasi-natural experiment based on the trading system of SSHC

ABSTRACT Utilizing the Shanghai-Shenzhen-Hong Kong Stock Connect trading system as a quasi-natural experiment, we examine the impact of capital market liberalization on corporate ESG rating divergence and its underlying mechanisms through a staggered difference-in-differences (DID) model. Our results demonstrate that capital market liberalization significantly heightens ESG rating divergence among the target firms. Mechanism tests reveal that this effect is primarily driven by increased corporate ESG disclosure and heightened scrutiny from domestic and foreign rating agencies. Heterogeneity analysis indicates that the impact is more significant for firms with lower media attention, reduced market competition, and minimal influence from offshore business philosophies. These findings offer empirical evidence supporting further efforts to promote economic and environmental sustainability.

On the research of multiplier effects in complex production systems

Digital transformation of institutional environment, orientation towards efficiency in the state planning, processes of new industrialisation and import substitution, variability of consumer behaviour, tightening competition in the new geopolitical realities shape the context of modern production systems’ functioning. This necessitates the modification of approaches to measuring their efficiency. The paper’s aim is to model multiplier effects in complex production systems. The concept of production systems’ efficiency constitutes the methodological basis of the research. The methods include systems, comparative, and regression analysis. The evidence is eco nomic and environmental indicators of Russia’s largest metals enterprises taken from the AK&M Rating Agency and the SPARK Database for 2019–2022. The multiplier effects in complex production systems represent an extensive array of effects from technological, social, environmental, digital, and economic activities which impact on businesses’ science and technology development. The obtained regression models of the relationship between environmental and economic efficiencies confirm the presence of the complementary effects. This underlies the original imitation model reflecting the interaction between direct and cross effects from technological, social, environmental, digital, and economic activities of an enterprise. The findings can be practical when formulating strategies for the complex production systems development.

The Role of the Banking System in National Economy: Empirical Evidence from Romania

The aim of this paper is to investigate the role of banking system in Romanian economy, in 2008-2023 period, focusing on the interlinkages between bank deposit, bank credit and interest rates. Additionally, this paper analyzes the financial intermediation of banking system (measured by domestic credit to private sector by banks as % of GDP) in Romanian economy and its contribution to economic growth and development.

Stability of Traveling Wave Solutions in a Credit Rating Migration Free Boundary Problem

Stability of Traveling Wave Solutions in a Credit Rating Migration Free Boundary Problem

Integrating ESG Criteria in Corporate Strategies: Determinants and Implications for Performance

This study explores the integration of Environmental, Social, and Governance (ESG) principles into corporate practices, focusing on the methodologies used for their evaluation and the factors influencing their adoption. Through a qualitative and comparative analysis of European and Saudi Arabian contexts, the research examines how companies align their strategies with ESG requirements in diverse regulatory and cultural environments. Data is drawn from established ESG rating agencies, corporate sustainability reports, and case studies, allowing for a thorough investigation of internal and external evaluation processes and their implications for ESG scores. The study identifies key challenges in ESG implementation, including ambiguities in definitions, resource disparities, sector-specific considerations, and resistance due to cost or unfavorable ratings. It also highlights the role of legal and regulatory frameworks, such as the ESG Disclosure Guidelines introduced by the Saudi Capital Market Authority and global standards like the Global Reporting Initiative (GRI), in shaping corporate ESG practices. Recommendations emphasize the need for standardized evaluation criteria, targeted support for smaller enterprises, and stronger legal frameworks to promote transparency and compliance. The findings contribute to a deeper understanding of ESG dynamics and provide actionable insights for advancing corporate sustainability on a global scale.

Foreign asset expropriation and sovereign bond ratings in the developing world

Abstract Research shows that foreign asset expropriation narrows long-term bond spreads, resulting in lower borrowing costs. However, no empirical studies have investigated the effects of expropriation on sovereign bond ratings. Bondholders and sovereign bond issuers track ratings by credit rating agencies because they impact interest rates and capital costs. Using up to 59 developing countries from 1996 to 2016, we find that expropriation signals lower bond repayment, as asset confiscation blatantly violates international rule of law and discourages foreign direct investment (FDI) inflows, reducing bond ratings. Mediation analysis also indicates that FDI and the rule of law mediate the relationship between expropriation and bond ratings. Further, we distinguish between direct and indirect expropriation and observe that direct expropriation has a greater probability of decreasing ratings. Our research suggests that expropriation holds economic consequences for developing countries, indicating how expropriation negatively affects sovereign bond issuers in the financial and investment community.

Research on the Impact of ESG Performance on the Financing Outcomes of Enterprises

As societal expectations for corporate sustainability and social responsibility continue to rise, ESG (Environmental, Social, and Governance) factors have garnered significant attention from scholars in the fields of economics and finance. Practitioners frequently associate corporate value with the performance of sustainable development-linked bonds. However, it remains unclear whether a positive or negative correlation exists between enterprises' ESG performance and their debt financing costs. Understanding the extent to which ESG performance impacts debt financing costs is crucial for companies considering issuing such bonds. Consequently, this paper analyzes issuance data from sustainable development-linked bonds issued by listed companies on the Shanghai Stock Exchange in China from 2018 to 2022 to investigate the relationship between enterprises' ESG performance and their debt financing costs. The empirical findings indicate that there is a negative correlation between enterprises' ESG performance, and their debt financing costs, with credit ratings serving as an intermediary factor that reduces these costs when accompanied by high ESG ratings.

Does Corporate Governance Influence Firms’ Credit Ratings? Evidence from India

Does Corporate Governance Influence Firms’ Credit Ratings? Evidence from India

Global financial orders and credit rating agencies: disruptions and adaptations

Global financial orders and credit rating agencies: disruptions and adaptations

Mandatory CSR expenditure regulation and credit ratings: Evidence from India

Mandatory CSR expenditure regulation and credit ratings: Evidence from India

How do green municipal bonds affect carbon emissions in China? Evidence from the staggered difference-in-differences approach.

Under the "Dual Carbon Goals", China's municipal government bonds play a vital role in advancing local environmental governance. This paper constructs a quasi-natural experiment based on the issuance of green municipal bonds, and empirically examines its carbon emission reduction effects by using the staggered difference in differences approach. The issuance of green municipal bonds can substantially diminish the level of carbon intensity and pass a series of robustness tests. Green municipal bonds can generate green project financing effect, greening effect and industrial structure allocation effect to promote the reduction of carbon emission level in a region. At the same time, there exists heterogeneity in local governments' emphases on environmental protection, economic development, carbon peaking progress and urban resource endowment. Further research found that green municipal bonds have significant spatial spillover effect, which not only promotes the reduction of local carbon intensity, but also leads to the reduction of carbon intensity in the surrounding cities. The proposed policy implications include: increase the proportion of green municipal bonds in local government bonds; establish standardized issuing criteria of green municipal bonds, accelerate credit rating and improve performance management of green municipal bonds; design green municipal bonds according to local conditions; and strengthen green finance and its supporting services.

Multi-modal deep learning for credit rating prediction using text and numerical data streams

Multi-modal deep learning for credit rating prediction using text and numerical data streams

Determinants of Credit ratings in Asian Listed Firms: Evidence from Discriminant Analysis and Logit Method

Determinants of Credit ratings in Asian Listed Firms: Evidence from Discriminant Analysis and Logit Method

Earnings Transparency and Credit ratings : Considering Managerial Overconfidence

Earnings Transparency and Credit ratings : Considering Managerial Overconfidence

Development of Alternative Credit Rating Model for Individual and Sole Proprietor Based on Real Estate Information

Development of Alternative Credit Rating Model for Individual and Sole Proprietor Based on Real Estate Information

The Determinants of SME Credit Rationing in Morocco. Case of SMEs in the Casablanca Settat Region

In this article, we are concerned with a central element of the Moroccan economy, namely small and medium-sized enterprises (SMEs), which often find themselves in a situation where alternative sources of financing are not easily accessible, including bank financing. Indeed, Moroccan SMEs are closely dependent on banking institutions to obtain the financial support necessary for their projects. However, these businesses frequently face the phenomenon of credit rationing, necessitating improved access to credit. In this research work, we have contributed to the study of this phenomenon, focusing specifically on the Casablanca Settat region. Our research revolves around two essential objectives. Firstly, we aimed to evaluate the impact of credit rationing on SMEs in this region. Next, we focused on empirically identifying the determinants of this phenomenon. To achieve these objectives, we selected a target population of 218 SMEs from the Casablanca Settat region. Our initial statistical tests revealed that SMEs in the Casablanca-Settat region are facing both total credit rationing and partial credit rationing. Subsequently, the results obtained from multinomial logistic regression tests reveal that the SME's sector of activity, age, reputation, legal status, size, gender of its manager, age, education, nature of the relationship with the bank, and professional experience all play an important role in explaining this phenomenon.