Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/111348
Authors: 
Fuchs, Andreas
Gehring, Kai
Year of Publication: 
2015
Series/Report no.: 
Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 179
Abstract: 
Credit rating agencies are frequently criticized for producing biased sovereign ratings. This article discusses how the home country of rating agencies could affect rating decisions as a result of political economy influences and cultural distance. Using data from nine agencies based in six countries, we test whether agencies assign better ratings to their home countries, as well as to countries economically, geopolitically and culturally aligned with them. Our results show biases in favor of the respective home country, culturally more similar countries, and countries in which home-country banks have a larger risk exposure. Linguistic similarity seems to be the main transmission channel that explains the advantage of the home country.
Subjects: 
sovereign debt ratings
credit rating agencies
home bias
international finance
cultural distance
bank exposure
JEL: 
G24
F34
H63
F65
G15
Document Type: 
Working Paper

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