RESEARCH ON INFLUENCE OF THE INTERNATIONAL OPERATIONS OF CREDIT RATING AGENCIES

As global financial markets become increasingly integrated, so too do the financial institutions that operate within them. The international expansion of US-based credit rating agencies provides one such example. The most prominent of these agencies have expanded to operate in a wide-range of developed and emerging market economies and their opinions influence international investors and firms looking to raise debt either at home or abroad. Expanding into international markets is not without its challenges, perhaps the most significant of which is to ensure that some degree of global consistency exists across ratings while incorporating country-specific features that influence credit risk. Using a unique database of Moody's ratings from six different countries, I model the agency's rating assignment decision and document the extent to which the model applies to firms from different countries. I find that significant cross-country differences exist and that a single model depicting rating assignments does not accurately reflect the actual ratings assigned in some countries.