First-mover disadvantage: the sovereign ratings mousetrap

Klusak, Dr Patrycja, Kraemer, Moritz and Vu, Huong (2020) First-mover disadvantage: the sovereign ratings mousetrap.

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Using 102 sovereigns rated by the three largest credit rating agencies (CRA), S&P, Moody’s and Fitch between January 2000 and January 2019, we are the first to document that the first- mover CRA (S&P) in downgrades falls into a commercial trap. Namely, each sovereign downgrade by one notch by the firstmover CRA (S&P) causes the ratio of S&P’s sovereign rating coverage to Moody’s to fall by approximately 0.01. The more downgrades S&P makes in a given month, the more their sovereign rating coverage falls relative to Moody’s. Our results are more pronounced for downgrades on small sovereign borrowers than on large sovereign borrowers. This paper explores the interaction between three themes of the literature: herding behaviour amongst CRAs, issues of conflict of interest and ratings quality.

Item Type: Article
Faculty \ School: Faculty of Social Sciences > Norwich Business School
UEA Research Groups: Faculty of Social Sciences > Research Groups > Finance Group
Faculty of Social Sciences > Research Centres > Centre for Competition Policy
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Depositing User: LivePure Connector
Date Deposited: 29 Mar 2021 23:57
Last Modified: 20 Jun 2023 15:08

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