Header

UZH-Logo

Maintenance Infos

The home bias in sovereign ratings


Fuchs, Andreas; Gehring, Kai (2017). The home bias in sovereign ratings. Journal of the European Economic Association, 15(6):1386-1423.

Abstract

Using data on 143 sovereigns provided by nine agencies based in six countries, we estimate the determinants of sovereign ratings to test whether agencies assign higher ratings to their respective home countries, as well as to economically, geopolitically, and culturally aligned countries. Our regression results show that the respective home country, culturally more similar countries, and countries to which home-country banks have a larger risk exposure receive higher ratings than justified by their economic and political fundamentals. Cultural proximity, as measured by linguistic similarity, is shown to be the main transmission channel that explains the advantage of the home country. Further empirical tests that control for the existence of foreign offices and rated countries’ levels of information transparency suggest that a more optimistic perception of risks rather than informational advantages drives this cultural home bias.

Abstract

Using data on 143 sovereigns provided by nine agencies based in six countries, we estimate the determinants of sovereign ratings to test whether agencies assign higher ratings to their respective home countries, as well as to economically, geopolitically, and culturally aligned countries. Our regression results show that the respective home country, culturally more similar countries, and countries to which home-country banks have a larger risk exposure receive higher ratings than justified by their economic and political fundamentals. Cultural proximity, as measured by linguistic similarity, is shown to be the main transmission channel that explains the advantage of the home country. Further empirical tests that control for the existence of foreign offices and rated countries’ levels of information transparency suggest that a more optimistic perception of risks rather than informational advantages drives this cultural home bias.

Statistics

Citations

Dimensions.ai Metrics
28 citations in Web of Science®
31 citations in Scopus®
Google Scholar™

Altmetrics

Downloads

8 downloads since deposited on 29 Jan 2018
8 downloads since 12 months
Detailed statistics

Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:06 Faculty of Arts > Institute of Political Science
Dewey Decimal Classification:320 Political science
Scopus Subject Areas:Social Sciences & Humanities > General Economics, Econometrics and Finance
Language:English
Date:2017
Deposited On:29 Jan 2018 15:54
Last Modified:26 Jan 2022 15:42
Publisher:Oxford University Press
ISSN:1542-4766
OA Status:Green
Publisher DOI:https://doi.org/10.1093/jeea/jvx009

Download

Green Open Access

Download PDF  'The home bias in sovereign ratings'.
Preview
Content: Published Version
Language: English
Filetype: PDF (Nationallizenz 142-005)
Size: 1MB
View at publisher