We study the effect of conflicts of interest on credit ratings and analyze the rating maintenance of credit rating agencies for various clienteles. By examining the rating-transition path, we found that rating agencies favor their valued clients by stepwise downgrades and full and timely upgrades. Favored clients could, therefore, save capital cost and possibly gain a larger investor base for their new issues. However, such rating behavior would undermine the rating quality and reputation of rating agencies in the long term. Our results provide evidence for the meager literature on rating-agency conflicts from the rating-maintenance perspective. Our findings also lend support to the growing literature that rating agencies do not provide quality services to investors when the regulation is indulgent or the competition within the rating industry is severe.

Financial sector of an economy plays an important role in its economic development and prosperity of the country. Banking industry serves as the backbone of the financial sector that accumulates saving from surplus economic units in the form of deposits and provides it to deficit economic units in the form of advances. Banking industry provides support to economy and industries in specific in the time of recessions and economic crisis. But when banks are at the heart of economic recession or banks are the cause of financial crisis like the recent past financial crisis 2007-09, it makes the situation worst for economic recovery. So it is of great importance to keenly observe the performance of the banks and their compliance with the regulatory requirements.   Performance of the banks is measured at two levels, one is at the management and regulatory level of the banks and another is at external rating agencies. Purpose of regulatory and supervisory rating systems is to measure the bank performance at internal level and its compliance with regulatory requirements to keep the bank on right track. These ratings are highly confidential and are only available to the bank management.  External credit rating agencies examine and evaluate the banks and issue ratings for the general public and investors in particulars. It is of great importance that both these ratings present the same results about the condition of the banks to provide clear information to investors and management. In past several banks suffer from bankruptcy that was the failure of both internal rating systems and credit rating agencies.   CAMELS is the supervisory and regulatory rating system implemented by State Bank of Pakistan. It takes into account six important components of a bank when it evaluates performance of the bank. These components are Capital, Assets, Management, Earning, Liquidity and Sensitivity to market risk. Ratings is assigned to theses components on the scale of 1 to 5 and that is a base for composite rating that also ranged from 1 to 5. PACRA rating agency is the dominant credit rating agency of Pakistan that performs ratings for most banks and industries in the country. In our research we examine the similarities in the results generated by CAMELS rating system and PACRA rating agency. For that purpose we sample seventeen commercial banks of Pakistan Banking industry.   We observed that results generated by sample banks do not show any similarities with each other. This might be an indication of the banks that went on to bankruptcy in past three to four years or a future threat to financial sector of Pakistan.

Credit granting is not only one core business but also the major profit source of banks. Non-Performing Loan Ratio (NPL Ratio) is an important index to evaluate the quality of credit granting and to influence profitability of banks. Recently, NPL ratio, which soared to record level, of local banks does not only hurt their asset quality but also threaten their surviving space due to the changes of internal structure, overbanking, internationalization of local banking industry, economic recession, the subprime crisis in 2007. Theoretically, banks have their own credit granting policy and credit examination system; however, there is soaring NPL ratio to cause huge NPL losses in banks because of the differences of credit grating practices. Nevertheless, there are some local banks which have lower NPL ratio. Therefore, this research is to help us to understand the possible factors of overdue loan that happened in corporate banking, and try to discover the key factors. Also, try to sampling those key factors from the past experiences for future crediting reference. The main profit from a bank is the margin of deposit and credit loan interest. Therefore, the overdue loan is highly related to a bank¡¦s profit. Moreover, it is necessary for banks to pay more cost to make up the losses which are caused by the NPL. Certainly, it is safest way for banks to acquire 100% collaterals for creditors¡¦ right, although 100% collaterals could be acquired, the creditors cannot ignore the impacts (on the creditors¡¦ profitability) of the necessary litigation expenses for disposing the collaterals. As a result, fully recognize the customers¡¦ credit condition before drawing is the only way to avoid the NPL loss and ensure the profit.

Bakgrund: Kreditvärderingsinstituten har genom åren fått en del kritik. Under finanskrisen kring 2008 var en bidragande orsak till att kraschen blev så allvarlig på grund av felaktiga kreditvärderingar. Detta var dock endast möjligt på grund av att banker i stor utsträckning ignorerade riskerna med de felaktiga kreditbetygen, som de med hög sannolikhet var medvetna om. Med bakgrund som denna anser författarna att det är av intresse och nytta att granska huruvida kreditbedömningar på banker påverkar aktiekursen och på så sätt bolagsvärdet. Syfte: Syftet med denna studie är att undersöka om kreditbetygsförändringar på de svenska storbankerna; Handelsbanken, Nordea, SEB och Swedbank påverkar respektive banks aktiekurs. Ett delsyfte är att studera eventuell omfattning av denna påverkan på aktiekursen. Ett vidare delsyfte är att undersöka om det finns en skillnad i hur kreditbetygsförändringar påverkar aktiepriset hos de svenska storbankerna i hög- respektive lågkonjunktur. Metod: Denna kvantitativa studie grundas i en deduktiv ansats och hypoteser har utformats med hjälp av författarnas utvalda teorier: Effektiva marknadshypotesen (EMH), Agentteori och Signalteori. Studien har sedan genomförts i form av en eventstudie och det har uppmätts om det finns signifikanta avvikelser i aktiekursen vid publicerandet av en kreditbetygsförändring. Resultat: Resultatet i studien visar på att det finns signifikant påverkan på aktiekursen vid kreditbetygsnedgraderingar på eventdagen. Det påvisades även att lågkonjunktur var en bidragande faktor till aktieutvecklingen. Slutsats: Denna studie finner att kreditbetygsförändringar utgör en effekt på aktiekursen hos de svenska storbankerna. Det kan dock inte fastställas om det finns någon skillnad mellan upp- och nedgraderingar i denna studie. Resultatet visar istället på att lågkonjunktur är den bakomliggande orsaken till att aktiekursen påverkas signifikant. Resultatet tyder även på att aktiekursen har anpassat sig snabbare än i tidigare studier, vilket kan vara en följd av en mer digitaliserad marknad. / Background: Credit rating agencies have received a lot of criticism over the years. During the financial crisis, a contributing cause to why the crash became so serious was due to incorrect credit ratings. This was although only possible because banks generally ignored the risk in the incorrect credit ratings, which they with high probability knew of. With a background like this, the authors believe that it is of interest and benefit to examine whether credit assessments on banks affect the stock price and thus the company value. Purpose: The purpose of this study is to investigate whether credit rating changes on the major swedish banks; Handelsbanken, Nordea, SEB and Swedbank affect each bank's stock price. One part of the purpose is to study the extent of this impact on the stock price. A further part of the purpose is to study if there is a difference in the effect credit rating changes have on the major swedish banks stock price in a economic expansion respective recession. Methodology: This quantitative study is based on a deductive approach and hypotheses have been designed using the authors' selected theories: The Effective Market Hypothesis (EMH), Agent Theory and Signal Theory. The study is then implemented in the form of an event study and it has been tested if there are any significant deviations in the stock price connected to the credit rating changes. Results: The result of the study indicates that there is significant effect on the stock price during the event day when a credit rating downgrade is announced. The results also show that recession is a contributing factor to the significant effect on the stock price. Conclusions: This study finds that changes of credit ratings constitute an effect on the stock price among the big Swedish banks. It can however not be established if there is a difference between up- and downgrades. The result indicates instead that recession is the contributing factor to the significant effect on the stock price. The results also indicate that the stock price has adjusted faster than in earlier studies, which can be an effect of a more digitized market.

No description available.

Kreditvärderingsinstitut arbetar med att göra analyser och bedömningar om vad bolag har för kreditvärdighet genom att tilldela ett kreditbetyg. Bolagen kan välja vilket kreditbetyg de vill publicera till allmänheten. Kreditbetygen används som ett verktyg på obligationsmarknaden för att prissätta dessa, och har därför betydelse för fastighetsbolagens kreditvärdighet. Obligationsmarknaden är en viktig finansieringskälla för större fastighetsbolag. Syftet med detta arbete är att ge läsaren en övergripande bild av de dominerande kreditvärderingsinstituten på den svenska fastighetsmarknaden och eventuella likheter, skillnader och potentiella svagheter. Detta för att identifiera eventuella påföljder som de dominerande kreditvärderingsinstituten kan medföra. Arbetet utgår från både kvalitativ och kvantitativ metod. Den kvalitativa metoden består av ett teoretiskt ramverk som innehåller institutens betygsskalor, kreditvärderingsprocess, policys och disclaimer. Kvantitativa metoden innefattar mejlintervjuer, som skickats ut till 30 svenska fastighetsbolag med publika kreditbetyg. Resultaten visar att det finns likheter, skillnader och svagheter mellan de olika kreditvärderingsinstituten. Trots dominerande likheter hos instituten visade resultatet från mejlintervjuerna en skillnad på fyra betygssteg i snitt-kreditbetyg hos fastighetsföretagen och skillnader i kreditbetyg till Danske Bank. Likheterna och skillnaderna kan leda till svagheter som att fastighetsbolag betalar mycket pengar för ett eller flera kreditbetyg som instituten inte tar ansvar över, och som investerare eventuellt fattar investeringsbeslut baserat på. / Credit rating agencies work to make analyzers and assessments of what companies' creditworthiness is by assigning a credit rating. Companies can choose which credit ratings they want to publish to the public. The credit ratings are used as a tool for obligations to price these and are important for the real estate companies' creditworthiness. Liabilities market is an important source of financing for major real estate companies.   The purpose of this Bachelor Thesis is to give the reader an overall picture of the dominant credit rating agency in the Swedish real estate market and point out any similarities, differences and potential weaknesses. This is to identify any penalties that the dominant credit rating agencies may incur. This work is based on both qualitative and quantitative methods. The qualitative method consists of a theoretical framework that contains the institutions' grading scales, credit rating process, policies and disclaimer. The quantitative method includes email interviews, which have been sent out to 30 Swedish real estate companies with public credit ratings.  Results show that there are similarities, differences and weaknesses between the different credit rating agencies. The dominant similarities between the institutions showed the results from the email interviews and the difference between four rating steps in the average credit rating of the real estate companies and differences in credit ratings to Danske Bank. The similarities and differences can lead to weaknesses such as real estate companies paying a lot of money for one or more credit ratings, which the institutions do not take responsibility for, and on which investors may make investment decisions based on.

Kredito reitingai viena iš populiariausių, plačiai naudojamų priemonių vertinant riziką, susijusią su emitento galimybėmis ateityje vykdyti savo finansinius įsipareigojimus. Pastarųjų metų finansų krizė finansų rinkų dalyvius privertė suabejoti kredito reitingų patikimumu ir kredito reitingų agentūrų veikla. Kredito reitingų populiarumas, jų reikšmė ir abejonės dėl jų patikimumo skatina išanalizuoti kredito reitingų naudojamas metodologijas, kad suprasti, kaip naudoti jų teikiamą informaciją. Tyrimo problema – ar nepriklausomų kredito reitingų agentūrų suteikti kredito reitingai yra objektyvūs ir patikimi, ir ar investuotojai gali remtis jais priimdami finansinius sprendimus. Tyrimo tikslas – išnagrinėjus kredito reitingų agentūrų naudojamas metodologijas, palyginti Lietuvos komercinių bankų veiklos rezultatų kaitą su jiems suteiktų kredito reitingų pokyčiais bei įvertinti suteikiamų kredito reitingų patikimumą. Šiam tikslui pasiekti, nustatyti tokie uždaviniai: 1. pateikti kredito reitingų sampratą, aprašyti jų suteikimo procesą; 2. išanalizuoti metodologijas, naudojamas suteikiant kredito reitingus; 3. išanalizuoti priežastis, lėmusias pasitikėjimo kredito reitingų agentūromis mažėjimą ir šių institucijų priežiūros priemones; 4. atlikti ekspertinį analizuojamų bankų ir jų aplinkos rodiklių kompleksinį vertinimą; 5. įvertinti kredito reitingų patikimumą, lyginant jų kitimą su kelių Lietuvos komercinių bankų finansinių rodiklių kaita. Baigiamajame magistro darbe iškelta... [toliau žr. visą tekstą] / Credit ratings are one of the most popular and widely used measure the creditworthiness of issuers. The financial crisis of late years reduced trust of credit ratings and credit rating agencies. The popularity of credit ratings, their importance and doubts of their trustworthiness motivate to analyze methodologies that are used by credit rating agencies and interpret the information credit ratings gives in a properly way. The problem of the research – do sovereign credit ratings are objective and trustworthiness and investors can use them then making financial decisions. The purpose of the research – to analyze methodologies that are used by credit rating agencies, compare Lithuanian commercial banks‘ financial indices and credit ratings dynamics and evaluate the trustworthiness of credit ratings. Tasks of this work: 1. to give the conception of credit ratings and to decribe the process of estimating them; 2. to analyze the methodologies that are used by credit rating agencies; 3. to analyze the reasons of reduced trustworthiness of credit rating agencies and tools that could be used to supervise them; 4. to perform experts‘ evaluation of analyzed banks and their environment by using the multiciterial analysis; 5. evaluate the trustworthiness of credit ratings by comparing their dynamics with dynamics of financial indices of some Lithuanian commercial banks. The hypothesis of Master‘s Work – financial indices ant their dynamics do not definetely gives significant influence... [to full text]

This thesis analyses long and short-term perception of announcements issued by leading credit rating agencies (Fitch, Moody's and S&P) in sovereign bond markets. Using three empirical approaches we assess the nature of impact of CRAs on 10Y sovereign bond yields and 5Y CDS of 24 countries of EU between 2002 and 2012. We find significant response of sovereign bond yield and CDS spreads to downgrades and negative outlooks. Furthermore there is evidence of anticipative power of sovereign bond markets in foreseeing negative events implying CRAs lag the market. The spillover effect from credit rating announcements has been revealed between both EMU and non-EMU parts of EU implying the financial integration is not limited only to countries with common currency. Well performing economies outside EMU are resistant to contagion. JEL Classification C23, F34, G10, G14, G15 Keywords credit rating; credit default swap; rating agency; sovereign bond; EU Author's e-mail tomhav@gmail.com Supervisor's e-mail roman.horvath@gmail.com

O presente trabalho teve por objetivo avaliar aspectos relevantes da economia internacional. O primeiro ensaio desta tese visou avaliar pela primeira vez (até onde se tem conhecimento) se o recente desenvolvimento do mercado de Credit Default Swaps - CDS alterou os efeitos das mudanças de rating sobre o mercado financeiro.Como o CDS é um derivativo que tem como objetivo refletir a qualidade do crédito do ativo avaliado e esta mensuração é feita através do mercado e de forma contínua no tempo, este instrumento poderia reduzir a relevância dos ratings atribuídos pelas agências; uma vez que estes últimos também avaliam a qualidade do crédito, mas sua atuação é discreta no tempo. Foi empregada a metodologia de estudo de evento a uma base de dados diária de CDS, bolsa e taxas de câmbio para37 países. Em resumo,foram encontradas evidências de que o impacto das mudanças de ratings sobre os ativos financeiros sofreu moderação nos últimos dez anos e que o papel do CDS pode estar por trás desta redução. Além disso, foram encontrados resultados que mostram que o mercado de CDS é o que mais reage a reclassificações de risco. O principal objetivo dos ensaios seguintes é trazer luz ao debate das fontes de competitividade no comércio internacional. Neste sentido, o segundo ensaio trata do papel do custo fixo de entrada para a exportação sobre a competitividade internacional no nível da firma. Foi estimadoo custo médio de entrada para a exportação utilizando o banco de dados do World Bank Enterprise Survey do Banco Mundial que conta com informações de mais de 70 mil firmas de diversos setores de atividade distribuídas em mais de 120 países em desenvolvimento. A pesquisadora se apoiou no modelo e na metodologia desenvolvidos na publicação da Econometrica de Das, Roberts e Tybout (2007) e conclui que em média uma firma paga 3,2 milhões de dólares para começar a exportar. Além disso, encontrou que o custo fixo de entrada para exportação varia entre os países e isso ajuda a explicar porque firmas semelhantes com produtividade parecida instaladas em países diferentes têm probabilidades distintas de serem exportadoras. No terceiro ensaio desta tese, estudou-se o impacto da desoneração da folha de pagamento, implementada a partir de 2011, nas exportações e importações brasileiras. Através de um painel de efeito fixo para produto, relacionando as exportações e importações em função da variável desoneração e a da variável de intensidade de mão-de-obra na produção do bem. Os dados foram extraídos do MDIC, da PIA e a variável desoneração foi construída utilizando as diversas leis que, ao longo do tempo, foram ampliando o rol de bens desonerados. Grosso modo, controlando por intensidade de mão-de-obra, encontrou-se que as desonerações foram responsáveis por uma queda da quantidade importada dos bens cujos similares foram desonerados internamente, enquanto que o efeito nas exportações provocou uma queda nos preços dos bens desonerados que não foi compensada por uma elevação na quantidade exportada, o que conjuntamente resultou em uma queda das exportações em valor. / This thesis evaluated some relevant aspects of the international economy. The first chapter evaluatesfor the first time (as far as we know) if the recent development of the credit default swaps market, CDS, has changed the effects of rating reclassifications on the financial market. Given that the price of CDS is driven bythe entity\'s credit quality and it moves continuously over time, this instrument would reduce the significance of ratings assigned by the agencies, since these agencies act discretely over time. We apply the event study methodology to a daily database of CDS, stocks and exchange rates for 37 countries. Generally speaking, we find evidences that the impact of ratings changes on financial assets has moderated over the past decade and that the role of CDS may explain this reduction. Furthermore, we find results that show that the CDS market is more responsive to risk reclassification. The following chapters have the main objective to shed some light on the debate on the sources of competitiveness in international trade. In this sense, the second chapter studies the role of sunk entry cost to export in international competitiveness at firm level. We estimate the average export sunk entry cost using the World Bank Enterprise Survey database of the World Bank that has informations about more than 70 thousand firms spreaded over several activity\'s sectors and more than 120 developing countries. We followed the model and methodology developed by Das, Roberts and Tybout in a paper published in Econometrica in 2007 and we found that a firm, in average, pays 2.3million dollars in order to start exporting. Besides that, we found that the export entry cost varies between countries and this fact helps to explain why similar firms in different countries have different probabilities to become exporters. In the third chapter of this thesis, we present a study on the impact of the payroll tax exemption implemented since 2011 on Brazilian exports and imports. Using a panel of fixed effect for product, we will relate the exports and imports as function of the variable exemption and the variable of labor intensity in the production function of the good. The data were extracted from the MDIC, the PIA and the variable exemption was constructed using the many laws that, over time, were expanding the list of exempted goods. Generally speaking, controlling by labor intensity, we found that the payroll tax exemption was responsible for a drop in the quantity of goods imported from abroad, while the effect on exports led to a drop in the prices of the goods exported, which was not offset by a rise in the quantity exported, resulting in a fall in exports by FOB value.

O presente trabalho teve por objetivo avaliar aspectos relevantes da economia internacional. O primeiro ensaio desta tese visou avaliar pela primeira vez (até onde se tem conhecimento) se o recente desenvolvimento do mercado de Credit Default Swaps - CDS alterou os efeitos das mudanças de rating sobre o mercado financeiro.Como o CDS é um derivativo que tem como objetivo refletir a qualidade do crédito do ativo avaliado e esta mensuração é feita através do mercado e de forma contínua no tempo, este instrumento poderia reduzir a relevância dos ratings atribuídos pelas agências; uma vez que estes últimos também avaliam a qualidade do crédito, mas sua atuação é discreta no tempo. Foi empregada a metodologia de estudo de evento a uma base de dados diária de CDS, bolsa e taxas de câmbio para37 países. Em resumo,foram encontradas evidências de que o impacto das mudanças de ratings sobre os ativos financeiros sofreu moderação nos últimos dez anos e que o papel do CDS pode estar por trás desta redução. Além disso, foram encontrados resultados que mostram que o mercado de CDS é o que mais reage a reclassificações de risco. O principal objetivo dos ensaios seguintes é trazer luz ao debate das fontes de competitividade no comércio internacional. Neste sentido, o segundo ensaio trata do papel do custo fixo de entrada para a exportação sobre a competitividade internacional no nível da firma. Foi estimadoo custo médio de entrada para a exportação utilizando o banco de dados do World Bank Enterprise Survey do Banco Mundial que conta com informações de mais de 70 mil firmas de diversos setores de atividade distribuídas em mais de 120 países em desenvolvimento. A pesquisadora se apoiou no modelo e na metodologia desenvolvidos na publicação da Econometrica de Das, Roberts e Tybout (2007) e conclui que em média uma firma paga 3,2 milhões de dólares para começar a exportar. Além disso, encontrou que o custo fixo de entrada para exportação varia entre os países e isso ajuda a explicar porque firmas semelhantes com produtividade parecida instaladas em países diferentes têm probabilidades distintas de serem exportadoras. No terceiro ensaio desta tese, estudou-se o impacto da desoneração da folha de pagamento, implementada a partir de 2011, nas exportações e importações brasileiras. Através de um painel de efeito fixo para produto, relacionando as exportações e importações em função da variável desoneração e a da variável de intensidade de mão-de-obra na produção do bem. Os dados foram extraídos do MDIC, da PIA e a variável desoneração foi construída utilizando as diversas leis que, ao longo do tempo, foram ampliando o rol de bens desonerados. Grosso modo, controlando por intensidade de mão-de-obra, encontrou-se que as desonerações foram responsáveis por uma queda da quantidade importada dos bens cujos similares foram desonerados internamente, enquanto que o efeito nas exportações provocou uma queda nos preços dos bens desonerados que não foi compensada por uma elevação na quantidade exportada, o que conjuntamente resultou em uma queda das exportações em valor. / This thesis evaluated some relevant aspects of the international economy. The first chapter evaluatesfor the first time (as far as we know) if the recent development of the credit default swaps market, CDS, has changed the effects of rating reclassifications on the financial market. Given that the price of CDS is driven bythe entity\'s credit quality and it moves continuously over time, this instrument would reduce the significance of ratings assigned by the agencies, since these agencies act discretely over time. We apply the event study methodology to a daily database of CDS, stocks and exchange rates for 37 countries. Generally speaking, we find evidences that the impact of ratings changes on financial assets has moderated over the past decade and that the role of CDS may explain this reduction. Furthermore, we find results that show that the CDS market is more responsive to risk reclassification. The following chapters have the main objective to shed some light on the debate on the sources of competitiveness in international trade. In this sense, the second chapter studies the role of sunk entry cost to export in international competitiveness at firm level. We estimate the average export sunk entry cost using the World Bank Enterprise Survey database of the World Bank that has informations about more than 70 thousand firms spreaded over several activity\'s sectors and more than 120 developing countries. We followed the model and methodology developed by Das, Roberts and Tybout in a paper published in Econometrica in 2007 and we found that a firm, in average, pays 2.3million dollars in order to start exporting. Besides that, we found that the export entry cost varies between countries and this fact helps to explain why similar firms in different countries have different probabilities to become exporters. In the third chapter of this thesis, we present a study on the impact of the payroll tax exemption implemented since 2011 on Brazilian exports and imports. Using a panel of fixed effect for product, we will relate the exports and imports as function of the variable exemption and the variable of labor intensity in the production function of the good. The data were extracted from the MDIC, the PIA and the variable exemption was constructed using the many laws that, over time, were expanding the list of exempted goods. Generally speaking, controlling by labor intensity, we found that the payroll tax exemption was responsible for a drop in the quantity of goods imported from abroad, while the effect on exports led to a drop in the prices of the goods exported, which was not offset by a rise in the quantity exported, resulting in a fall in exports by FOB value.