What drives differences of opinion in sovereign ratings? The roles of information disclosure and political risk

Huong Vu, Rasha Alsakka, Owain ap Gwilym

Research output: Contribution to journalArticle

4 Citations (Scopus)
11 Downloads (Pure)

Abstract

This paper investigates the causes of split sovereign ratings across S&P, Moody's, and Fitch for 64 countries from 1997 to 2011. We identify that split sovereign ratings are not symmetric, with S&P tending to be the most conservative agency. We find that opaque sovereigns are more likely to receive split ratings. Political risk plays a highly significant role in explaining split ratings and dominates economic and financial indicators. Out‐of‐sample model performance is enhanced by capturing political risk. Government information disclosure affects split ratings between Moody's and Fitch in emerging countries. The study implies an incentive for governments to reduce political uncertainty and to enhance transparency.
Publisher Statement: This is the peer reviewed version of the following article: Vu, H, Alsakka, R & ap Gwilym, O 2017, 'What drives differences of opinion in sovereign ratings? : The roles of information disclosure and political risk' International Journal of Finance and Economics, vol 22, no. 3, pp. 216-233, which has been published in final form at https://dx.doi.org/10.1002/ijfe.1579. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.

Original languageEnglish
Pages (from-to)216-233
Number of pages18
JournalInternational Journal of Finance and Economics
Volume22
Issue number3
Early online date27 Apr 2017
DOIs
Publication statusPublished - Jul 2017

Fingerprint

Political risk
Rating
Sovereign ratings
Information disclosure
Government
Political uncertainty
Financial indicators
Economic indicators
Transparency
Economics
Incentives
Emerging countries
Disclosure

Bibliographical note

This is the peer reviewed version of the following article: Vu, H, Alsakka, R & ap Gwilym, O 2017, 'What drives differences of opinion in sovereign ratings? : The roles of information disclosure and political risk' International Journal of Finance and Economics, vol 22, no. 3, pp. 216-233, which has been published in final form at https://dx.doi.org/10.1002/ijfe.1579. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.

Keywords

  • Sovereign credit ratings
  • information opacity
  • split ratings
  • information disclosure
  • opacity
  • out-of-sample performance
  • political risk
  • sovereign split ratings

Cite this

What drives differences of opinion in sovereign ratings? The roles of information disclosure and political risk. / Vu, Huong; Alsakka, Rasha; ap Gwilym, Owain.

In: International Journal of Finance and Economics, Vol. 22, No. 3, 07.2017, p. 216-233.

Research output: Contribution to journalArticle

@article{f3cb7a79ee7f49b7b3c53598b84aa2de,
title = "What drives differences of opinion in sovereign ratings?: The roles of information disclosure and political risk",
abstract = "This paper investigates the causes of split sovereign ratings across S&P, Moody's, and Fitch for 64 countries from 1997 to 2011. We identify that split sovereign ratings are not symmetric, with S&P tending to be the most conservative agency. We find that opaque sovereigns are more likely to receive split ratings. Political risk plays a highly significant role in explaining split ratings and dominates economic and financial indicators. Out‐of‐sample model performance is enhanced by capturing political risk. Government information disclosure affects split ratings between Moody's and Fitch in emerging countries. The study implies an incentive for governments to reduce political uncertainty and to enhance transparency.Publisher Statement: This is the peer reviewed version of the following article: Vu, H, Alsakka, R & ap Gwilym, O 2017, 'What drives differences of opinion in sovereign ratings? : The roles of information disclosure and political risk' International Journal of Finance and Economics, vol 22, no. 3, pp. 216-233, which has been published in final form at https://dx.doi.org/10.1002/ijfe.1579. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.",
keywords = "Sovereign credit ratings, information opacity, split ratings, information disclosure, opacity, out-of-sample performance, political risk, sovereign split ratings",
author = "Huong Vu and Rasha Alsakka and {ap Gwilym}, Owain",
note = "This is the peer reviewed version of the following article: Vu, H, Alsakka, R & ap Gwilym, O 2017, 'What drives differences of opinion in sovereign ratings? : The roles of information disclosure and political risk' International Journal of Finance and Economics, vol 22, no. 3, pp. 216-233, which has been published in final form at https://dx.doi.org/10.1002/ijfe.1579. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.",
year = "2017",
month = "7",
doi = "10.1002/ijfe.1579",
language = "English",
volume = "22",
pages = "216--233",
journal = "International Journal of Finance and Economics",
issn = "1076-9307",
publisher = "Wiley",
number = "3",

}

TY - JOUR

T1 - What drives differences of opinion in sovereign ratings?

T2 - The roles of information disclosure and political risk

AU - Vu, Huong

AU - Alsakka, Rasha

AU - ap Gwilym, Owain

N1 - This is the peer reviewed version of the following article: Vu, H, Alsakka, R & ap Gwilym, O 2017, 'What drives differences of opinion in sovereign ratings? : The roles of information disclosure and political risk' International Journal of Finance and Economics, vol 22, no. 3, pp. 216-233, which has been published in final form at https://dx.doi.org/10.1002/ijfe.1579. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.

PY - 2017/7

Y1 - 2017/7

N2 - This paper investigates the causes of split sovereign ratings across S&P, Moody's, and Fitch for 64 countries from 1997 to 2011. We identify that split sovereign ratings are not symmetric, with S&P tending to be the most conservative agency. We find that opaque sovereigns are more likely to receive split ratings. Political risk plays a highly significant role in explaining split ratings and dominates economic and financial indicators. Out‐of‐sample model performance is enhanced by capturing political risk. Government information disclosure affects split ratings between Moody's and Fitch in emerging countries. The study implies an incentive for governments to reduce political uncertainty and to enhance transparency.Publisher Statement: This is the peer reviewed version of the following article: Vu, H, Alsakka, R & ap Gwilym, O 2017, 'What drives differences of opinion in sovereign ratings? : The roles of information disclosure and political risk' International Journal of Finance and Economics, vol 22, no. 3, pp. 216-233, which has been published in final form at https://dx.doi.org/10.1002/ijfe.1579. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.

AB - This paper investigates the causes of split sovereign ratings across S&P, Moody's, and Fitch for 64 countries from 1997 to 2011. We identify that split sovereign ratings are not symmetric, with S&P tending to be the most conservative agency. We find that opaque sovereigns are more likely to receive split ratings. Political risk plays a highly significant role in explaining split ratings and dominates economic and financial indicators. Out‐of‐sample model performance is enhanced by capturing political risk. Government information disclosure affects split ratings between Moody's and Fitch in emerging countries. The study implies an incentive for governments to reduce political uncertainty and to enhance transparency.Publisher Statement: This is the peer reviewed version of the following article: Vu, H, Alsakka, R & ap Gwilym, O 2017, 'What drives differences of opinion in sovereign ratings? : The roles of information disclosure and political risk' International Journal of Finance and Economics, vol 22, no. 3, pp. 216-233, which has been published in final form at https://dx.doi.org/10.1002/ijfe.1579. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.

KW - Sovereign credit ratings

KW - information opacity

KW - split ratings

KW - information disclosure

KW - opacity

KW - out-of-sample performance

KW - political risk

KW - sovereign split ratings

U2 - 10.1002/ijfe.1579

DO - 10.1002/ijfe.1579

M3 - Article

VL - 22

SP - 216

EP - 233

JO - International Journal of Finance and Economics

JF - International Journal of Finance and Economics

SN - 1076-9307

IS - 3

ER -