Research On The Asymmetric Impact Of Sovereign Credit Rating On Financial Market Development From The Perspective Of National Culture’s Moderation

A country’s financial markets are critical to the country’s economic development,and financial investors often use sovereign credit ratings to measure the risk of investing in that country.Sovereign credit ratings are also widely used by regulators to control investment risk.Sovereign credit ratings provide a feasible analytical framework for various risky securities in international financial markets.This paper aims to deeply analyze the mechanisms by which S&P and Moody’s sovereign credit ratings affect the development of financial markets in different countries in the selected regions.Firstly,this paper takes the sovereign countries in Asia,Africa,America,and Europe as samples,using the comprehensive ordinary least squares regression(OLS)and fixed effects model,from the three dimensions of financial market depth,financial market access,and financial market efficiency,the potential impact of sovereign credit ratings on the development of financial markets is studied.The results of the Driscoll Kraay test show that the improvement of sovereign credit rating scores promotes the development of financial markets in the region.This paper has carried out robustness tests by changing substitute variables,changing the measurement methods of variables,and using three sub-dimensions of financial market development to ensure the robustness of the results.The results show that the positive impact of sovereign credit ratings on the development of financial markets in the region is robust.The findings provide ample insight into the potential link between sovereign credit ratings and financial market development and its dimensions.Secondly,this paper cites Hofstede’s method to measure national culture with a high degree of individualism and high uncertainty.When adding national culture as a moderator variable to the current research model,it is found that its moderating effect is significant.It has passed the robustness test,and instrumental variables do not affect this moderating effect.The differential moderating effect of national culture under different regions and income levels is further analyzed.The results show that when the country is located in different areas and income levels,the impact of sovereign credit ratings on the development of financial markets is significantly different.The impact of national culture on the development of both countries is significantly different.There are also differences in the moderating effects of relationships.Finally,using an autoregressive distributed lag model,this paper empirically tests the asymmetric effects of rising or falling sovereign credit ratings on the development of financial markets in selected regions.Empirical results show that the response of financial market development to the disclosure of sovereign credit rating information is asymmetric.This result provides an in-depth analysis of the asymmetric role of sovereign credit ratings in the macroeconomic environment,which is important for countries to formulate policy actions to respond to rating changes.Using a nonlinear model to capture the asymmetry of the impact of sovereign credit rating upgrades or downgrades on the development of financial markets is an innovation of this paper.The overall results of the paper support long-term asymmetry,while there is little evidence for the existence of short-term asymmetry.Unlike the previous literature limited to the event study method,this paper uses the historical rating level to establish the relationship between the explanatory variables and the explained variables under the standard error clustering method,which is another innovation of this paper.At the same time,considering the diversity of investors’ horizons,this paper innovatively extends the existing model at the micro level to overcome the impact of national policy differences.In addition,the innovation of this paper is also reflected in the consideration of national culture as a financial factor and the positive moderating role of national culture in the relationship between sovereign credit rating and financial market development,which has not been paid attention to in earlier studies.The research of this paper enriches the relevant literature on the relationship between national sovereign credit rating and financial market development,in theory,reveals the longterm asymmetric influence between the two under cultural moderations and provides a useful supplement for the logic of the role of sovereign credit rating in the financial market;In practice,it has important guiding significance for stakeholders such as analysts,investors and regulators to accurately understand the role of national sovereign credit ratings,analyze the level of financial market development,correctly understand the characteristics of national culture,and reasonably manage and control international investment risks.