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EU banks rating assignments: Is there heterogeneity between new and old member countries?

Caporale, Guglielmo Maria, Matousek, Roman, Stewart, Chris (2011) EU banks rating assignments: Is there heterogeneity between new and old member countries? Review of International Economics, 19 (1). pp. 189-206. ISSN 0965-7576. (doi:10.1111/j.1467-9396.2010.00940.x) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided. (Contact us about this Publication)
Official URL
http://dx.doi.org/10.1111/j.1467-9396.2010.00940.x

Abstract

We model EU countries' bank ratings using financial variables and allowing for intercept and slope heterogeneity. Our aim is to assess whether "old" and "new" EU countries are rated differently and to determine whether "new" ones are assigned lower ratings, ceteris paribus, than "old" ones. We find that country-specific factors (in the form of heterogeneous intercepts) are a crucial determinant of ratings. Whilst "new" EU countries typically have lower ratings than "old" ones, after controlling for financial variables we also discover that all countries have significantly different intercepts, confirming our prior belief. This intercept heterogeneity suggests that each country's rating is assigned uniquely, after controlling for differences in financial factors, which may reflect differences in country risk and the legal and regulatory framework that banks face (such as foreclosure laws). In addition, we find that ratings may respond differently to the liquidity and operating expenses to operating income variables across countries. Typically ratings are more responsive to the former and less sensitive to the latter for "new" EU countries compared with "old" EU countries. © 2011 Blackwell Publishing Ltd.

Item Type: Article
DOI/Identification number: 10.1111/j.1467-9396.2010.00940.x
Additional information: Unmapped bibliographic data: AD - Centre for Empirical Finance, Department of Economics and Finance, Brunel University, United Kingdom [Field not mapped to EPrints] AD - Centre for International Capital Markets, London Metropolitan Business School, London Metropolitan University, United Kingdom [Field not mapped to EPrints] AD - London Metropolitan Business School, London Metropolitan University, United Kingdom [Field not mapped to EPrints] JA - Rev. Int. Econ. [Field not mapped to EPrints]
Uncontrolled keywords: banking, European Union, financial market, regulatory framework
Subjects: H Social Sciences > HG Finance
Divisions: Faculties > Social Sciences > Kent Business School > Accounting and Finance
Depositing User: Tracey Pemble
Date Deposited: 08 Apr 2014 15:29 UTC
Last Modified: 29 May 2019 12:05 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/39105 (The current URI for this page, for reference purposes)
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