Determinants of the Distance between Sovereign Credit Ratings and Sub-Sovereign Bond Ratings : Evidence from Emerging Markets and Developing Economies

This article explores factors that affect the distance between sovereign credit ratings and the ratings assigned to new foreign-currency bonds issued by sub-sovereign entities (such as private non-financial corporations, financial firms, and public sector enterprises) in 47 emerging markets and deve...

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Main Authors:	Mohapatra, Sanket, Nose, Manabu, Ratha, Dilip
Format:	Journal Article
Published:	Taylor and Francis 2018
Subjects:	SOVEREIGN CREDIT RATINGS SUB-SOVEREIGN RATING INTERNATIONAL DEBT MARKETS SPILLOVER EFFECT SOVEREIGN CEILING BONDS EMERGING MARKET ECONOMIES
Online Access:	http://hdl.handle.net/10986/29117

id	okr-10986-29117
recordtype	oai_dc
spelling	okr-10986-291172021-05-26T09:05:19Z Determinants of the Distance between Sovereign Credit Ratings and Sub-Sovereign Bond Ratings : Evidence from Emerging Markets and Developing Economies Mohapatra, Sanket Nose, Manabu Ratha, Dilip SOVEREIGN CREDIT RATINGS SUB-SOVEREIGN RATING INTERNATIONAL DEBT MARKETS SPILLOVER EFFECT SOVEREIGN CEILING BONDS EMERGING MARKET ECONOMIES This article explores factors that affect the distance between sovereign credit ratings and the ratings assigned to new foreign-currency bonds issued by sub-sovereign entities (such as private non-financial corporations, financial firms, and public sector enterprises) in 47 emerging markets and developing economies. Censored and double-hurdle regression models are used to estimate the relative contributions of bond-level, issuer-level, and macroeconomic factors that determine this distance, separately for those rated at or below the sovereign rating and those rated above. For the three quarters or more of sub-sovereign bond ratings that are constrained by the sovereign rating ceiling, a Tobit regression model shows a smaller distance – suggesting stronger sovereign–corporate linkages – for public sector enterprises and financial firms relative to other firms. Riskier global financial conditions are also associated with sub-sovereign bonds being rated closer to the sovereign rating. For the small number of sub-sovereign bonds rated higher than the sovereign rating, a double-hurdle model shows that certain debt features – such as bonds backed by future-flow receivables or other collateral or structured as Special Purpose Vehicles (SPV) – significantly raise the likelihood of piercing the sovereign rating ceiling and also increase the distance above the sovereign ceiling. 2018-01-03T17:30:14Z 2018-01-03T17:30:14Z 2017-07-05 Journal Article Applied Economics 0003-6846 http://hdl.handle.net/10986/29117 CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Taylor and Francis Publications & Research :: Journal Article Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
topic	SOVEREIGN CREDIT RATINGS SUB-SOVEREIGN RATING INTERNATIONAL DEBT MARKETS SPILLOVER EFFECT SOVEREIGN CEILING BONDS EMERGING MARKET ECONOMIES
spellingShingle	SOVEREIGN CREDIT RATINGS SUB-SOVEREIGN RATING INTERNATIONAL DEBT MARKETS SPILLOVER EFFECT SOVEREIGN CEILING BONDS EMERGING MARKET ECONOMIES Mohapatra, Sanket Nose, Manabu Ratha, Dilip Determinants of the Distance between Sovereign Credit Ratings and Sub-Sovereign Bond Ratings : Evidence from Emerging Markets and Developing Economies
description	This article explores factors that affect the distance between sovereign credit ratings and the ratings assigned to new foreign-currency bonds issued by sub-sovereign entities (such as private non-financial corporations, financial firms, and public sector enterprises) in 47 emerging markets and developing economies. Censored and double-hurdle regression models are used to estimate the relative contributions of bond-level, issuer-level, and macroeconomic factors that determine this distance, separately for those rated at or below the sovereign rating and those rated above. For the three quarters or more of sub-sovereign bond ratings that are constrained by the sovereign rating ceiling, a Tobit regression model shows a smaller distance – suggesting stronger sovereign–corporate linkages – for public sector enterprises and financial firms relative to other firms. Riskier global financial conditions are also associated with sub-sovereign bonds being rated closer to the sovereign rating. For the small number of sub-sovereign bonds rated higher than the sovereign rating, a double-hurdle model shows that certain debt features – such as bonds backed by future-flow receivables or other collateral or structured as Special Purpose Vehicles (SPV) – significantly raise the likelihood of piercing the sovereign rating ceiling and also increase the distance above the sovereign ceiling.
format	Journal Article
author	Mohapatra, Sanket Nose, Manabu Ratha, Dilip
author_facet	Mohapatra, Sanket Nose, Manabu Ratha, Dilip
author_sort	Mohapatra, Sanket
title	Determinants of the Distance between Sovereign Credit Ratings and Sub-Sovereign Bond Ratings : Evidence from Emerging Markets and Developing Economies
title_short	Determinants of the Distance between Sovereign Credit Ratings and Sub-Sovereign Bond Ratings : Evidence from Emerging Markets and Developing Economies
title_full	Determinants of the Distance between Sovereign Credit Ratings and Sub-Sovereign Bond Ratings : Evidence from Emerging Markets and Developing Economies
title_fullStr	Determinants of the Distance between Sovereign Credit Ratings and Sub-Sovereign Bond Ratings : Evidence from Emerging Markets and Developing Economies
title_full_unstemmed	Determinants of the Distance between Sovereign Credit Ratings and Sub-Sovereign Bond Ratings : Evidence from Emerging Markets and Developing Economies
title_sort	determinants of the distance between sovereign credit ratings and sub-sovereign bond ratings : evidence from emerging markets and developing economies
publisher	Taylor and Francis
publishDate	2018
url	http://hdl.handle.net/10986/29117
_version_	1764468537800261632

Determinants of the Distance between Sovereign Credit Ratings and Sub-Sovereign Bond Ratings : Evidence from Emerging Markets and Developing Economies

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