Are credit rating agencies regionally biased? |
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Authors: | A Talha Yalta A Yasemin Yalta |
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Institution: | 1. TOBB University of Economics and Technology, Department of Economics, Sogutozu Caddesi No:43, Sogutozu, 06560, Ankara, Turkey;2. Hacettepe University, Department of Economics, Beytepe, 06800, Ankara, Turkey |
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Abstract: | We investigate claims of regional bias in the sovereign credit ratings given by the rating agencies Fitch, Moody’s and Standard & Poor’s by considering a wide range of macroeconomic, financial, institutional, regional and geopolitical indicators for 99 countries categorized into eight regions plus the United States. Empirical results based on seemingly unrelated regressions indicate a strong home country bias towards the United States, while there seem to be no special biases against individual groups of countries. We also demonstrate how modeling errors such as omitted variables can increase dispersion in the estimated regional effects, causing agencies to appear biased. |
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Keywords: | C31 F34 G15 G24 H63 Sovereign ratings Credit rating agencies Credit risk Seemingly unrelated regressions |
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