A Study Of Determinants Of Sovereign Ratings

The international agencies rating sovereign risk are main American three authoritative rating agencies, respectively is the Standard&Poor’s, Moody’s and Fitch. As important participants in international financial market, the rating agencies should provide real and effective rating results based on the justice and equity principle. However, the three agencies rating process has always been a "black box" operation, and they downgrade countries’rating results after European debt crisis, which making it necessary to discuss sovereign credit rating system and the specific influence factors. Domestic previous studies focus more on the effects of sovereign rating results, such as international economy,etc.But it’s also important to analyze the sovereign credit rating’s internal mechanism and influence factors.This article first presents systematically all the relevant domestic and overseas literature of the sovereign credit rating, on this basis, points out that the domestic sovereign credit ratings research mainly from the perspective of qualitative analysis instead of quantitative analysis, and they are short of deeply discuss of the rating agencies rating method and the influence factor. Then we state and compare the three rating agencies, Standard&Poor’s, Moody’s and Fitch, contrast their different ratings mode.Through the comparative method, we analyze the correlation and influence factors of three rating agencies’sovereign rating results in developed countries and developing countries.We use10basic macroeconomic indicators in83countries from year2010to2012to establish multiple linear regression model, and analyze the sovereign rating results’influence of different rating agencies to developed and developing countries by quantitative method.In this paper, the empirical results show that when a country has higher per capita GDP, lower inflation rate, smaller government fiscal deficit and lower banks non-performing loan ratio, it may have a higher sovereign credit rating. Compared to developing countries,developed countries usually have a higher sovereign rating, which is consistent with previous research.The innovation point of this article is under the background of the European debt crisis. When study the rating agency’s sovereign credit rating, we distinguish between developed and developing countries with a comparative perspective. We analyze the sovereign rating’s determinants in both developed and developing countries relatively, to further study whether the influence factors are same in those two types countries.