This study aims to investigate the relationship between systematic risk and credit ratings. The systematic risk, frequently measured by beta, is an important consideration for both investors and corporations. Therefore it is interesting to examine if indications about the systematic risk could be gained by looking at credit ratings, especially on the Nordic market, where credit ratings are seemingly growing in importance. Consequently, the following research hypothesis is posed; We intend to establish a relationship between market risk (Beta) and credit ratings for firms in the Nordic countries. In order to confirm or deny the research hypothesis, theories from peer reviewed databases were collected. These were divided into three sections; background theories, hypotheses about credit ratings and a literature review. The background theories consisted of two classical financial theories, the Capital Asset Pricing Model and the Efficient Market Hypothesis, which are the foundation upon which the research field have progressed. The hypotheses is specifically designed to explain the relationship between credit ratings and either systematic risk or stock price. The literature review contains information about studies which did not contribute to theory building, but produced results interesting in the research area.   The actual sample in the thesis consisted of the 58 credit rated companies on the Nordic stock market. These companies were rated by Moody’s and/or Standard & Poor’s, the two largest credit rating agencies in the world. As a measure of the systematic risk, betas for each of the companies were calculated. To investigate the relationship between these variables a regression analysis was performed, as well as one sample T-test using the software SPSS.   The result revealed a moderate relationship between beta and credit risk, a relationship which was not statistically significant on the five percent level. Our results suggest that credit ratings contain some information about companies’ systematic risk, a finding that might be useful for market participants.

What explains the shift towards greater direct public oversight of financial markets in international financial regulation that has characterized the response to the global financial crisis of 2007-2010? Over this period, the main international financial regulatory bodies have abandoned the market-based mechanisms that had informed their approach towards the regulation of different financial domains in the years before the crisis and significantly expanded the perimeter of state-based regulation. However, the extent and the timing of this shift cannot be regarded only as the by-product of the crisis, nor they can be explained by the existing interpretations of the political determinants of international regulatory policies. This study builds upon existing state-centric explanations of international regulatory policies, but it goes beyond these works by exploring how the preferences of the most influential countries in response to the crisis have been influenced by variations in the degree of public salience of different financial domains. More specifically, this study argues that the lasting increase in the public salience of financial regulatory policies in the US and different European countries since the last quarter of 2008 has created strong incentives for elected officials in these countries to challenge the market-based approach that had emerged in the decade and half before the crisis and to directly interfere in the international regulatory agenda. In order to explain this shift, this study will analyse the evolution in the international governance of three sets of markets and institutions that have occupied an important position in the international regulatory agenda in recent years: 1) OTC derivatives; 2) rating agencies; 3) hedge funds. Besides making an empirical contribution to the literature on the politics of international financial regulation, this study also contributes theoretically to this literature by deepening our understanding of the nexus between international regulatory coordination and domestic public opinion.

The concept of asymmetric information is probably best described by medieval idiom to buy a pig in a poke or to buy a cat in a sack, and is a long standing issue in a market economy. A solution to this predicament, is thought to be an objective third party certifier who would provide true information for the market participants. Credit Rating Agencies (CRAs) by all definitions act as such certifiers within financial markets and have been on the public spotlight for the last years. In both cases, the US subprime mortgage crisis and the EU sovereign debt crisis, the agencies were charged for miss-information on quality of financial products, that led to financial losses for the investors or debtors. Theoretical deduction suggest that certain market reaction to CRA announcements may indicate  if markets perceive CRAs themselves as selling a cat in a sack to the investors. Event study approach is employed to investigate how do sovereign debt market react to CRA announcements. The results suggest that sovereign debt market reaction is more pronounced if three major CRAs issue clustered announcements, and more actively react to following announcements as opposed to the leading ones.

Our current understanding of credit rating agencies’ influence on national sovereignty relies on a dichotomised and highly antagonistic view of the relationship between states and the global economy. This perspective is locked into the discursive confines of the structuralist-sceptics debate within the field of international political economy. CRAs are said to either erode state sovereignty or represent a manifestation of it. By abandoning the state-market, public-private and national-global dichotomies embedded within this debate, and the zero-sum mentality they are predicated upon, this thesis offers an alternative – “transformationalist” – perspective to view the power of CRAs and their influence on national sovereignty. Defying traditional categorization, CRAs’ power is the result of a state-market, public-private confluence of interest and therefore has no determinative influence on national sovereignty. In the course of this analysis, a second assumption embedded within the study of CRAs’ influence is criticised: the fixation on the “big three” rating agencies (Moody’s, S&P and Fitch) and the neglect of the significance of the credit rating itself. Because the rating determination process is opaque, and the credit rating itself is a highly simplified expression of an intricately complex financial, economic and political reality, the causes of a sovereign rating change are often “up for debate”. Governments, within certain degrees of interpretation, are able to embed their own domestic political interests into the “causes” of a rating change, thereby co-opting and co-constructing the power and expertise of CRAs. This can, when successful, enhance governments’ internal sovereignty over domestic social forces and their external sovereignty as they “filter” the influence of a non-state actor. New Zealand’s interaction with the CRAs throughout 2008 to 2012 illustrates how this dynamic occurs and its limitations. The thesis seeks to highlight the diversity and heterogeneity involved in the processes of globalization in general, and CRAs’ influence in particular, and in doing so open up political space to consider possible forms of resistance.

What explains the shift towards greater direct public oversight of financial markets in international financial regulation that has characterized the response to the global financial crisis of 2007-2010? Over this period, the main international financial regulatory bodies have abandoned the market-based mechanisms that had informed their approach towards the regulation of different financial domains in the years before the crisis and significantly expanded the perimeter of state-based regulation. However, the extent and the timing of this shift cannot be regarded only as the by-product of the crisis, nor they can be explained by the existing interpretations of the political determinants of international regulatory policies. This study builds upon existing state-centric explanations of international regulatory policies, but it goes beyond these works by exploring how the preferences of the most influential countries in response to the crisis have been influenced by variations in the degree of public salience of different financial domains. More specifically, this study argues that the lasting increase in the public salience of financial regulatory policies in the US and different European countries since the last quarter of 2008 has created strong incentives for elected officials in these countries to challenge the market-based approach that had emerged in the decade and half before the crisis and to directly interfere in the international regulatory agenda. In order to explain this shift, this study will analyse the evolution in the international governance of three sets of markets and institutions that have occupied an important position in the international regulatory agenda in recent years: 1) OTC derivatives; 2) rating agencies; 3) hedge funds. Besides making an empirical contribution to the literature on the politics of international financial regulation, this study also contributes theoretically to this literature by deepening our understanding of the nexus between international regulatory coordination and domestic public opinion.

Thesis (M.S.)--Auburn University, 2007. / Abstract. Vita. Includes bibliographic references (ℓ. 45-47)

Thesis (M. Econ.)--University of Hong Kong, 2000. / Includes bibliographical references.

Thesis (M.Econ.)--University of Hong Kong, 2000. / Includes bibliographical references. Also available in print.

abstract: While credit rating agencies use both forward-looking and historical information in evaluating a firm's credit risk, the role of forward-looking information in their rating decisions is not well understood. In this study, I examine the association between management earnings guidance news and future credit rating changes. While upward earnings guidance is not informative for credit rating changes, downward earnings guidance is significantly and positively associated with both the likelihood and speed of rating downgrades. In cross-sectional analyses, I find that downward guidance is especially informative in two important circumstances: (i) when a firm's current credit rating is overly optimistic compared to a model predicted rating, and (ii) when the relevance or reliability of alternative information sources is lower. In addition, I find that downward guidance is associated with lower future cash flows, as well as a higher volatility of future cash flows. Overall, the results are consistent with credit rating agencies incorporating voluntary bad news disclosures into their decisions about whether and when to downgrade a firm. / Dissertation/Thesis / Doctoral Dissertation Accountancy 2015

A main focus of this thesis is a relationship between government debt and rating of a respective country. The first chapter forms a theoretical basis and deals with a general characteristics of rating for all economic subjects, introduction of the three most important rating agencies and last but not least with government debt. The theoretical part is followed by a description of government debt's development and rating of the Czech Republic. An application part of the thesis conducts a basic analysis of relationship between government debt and rating and subsequently the core analysis using a specific framework from a rating agency.