Are Sovereign Credit Ratings Inflated by Competition?

Huong Vu, Rasha Alsakka, Owain ap Gwilym

Research output: Contribution to conferenceUnpublished paperpeer-review


Market for sovereign ratings is oligopolistic, but it is evolving to become less concentrated. However, decreasing market concentration has significant implications for the quality of sovereign ratings. Using a global dataset of sovereign ratings assigned by S&P, Moody’s, Fitch and Dominion Bond Rating Service (DBRS) during the period of 2000-2016, we find that S&P and Moody’s inflate (deflate) their ratings in response to the increase in Fitch’s (DBRS’s) market share in the previous year. DBRS employs a generous rating policy to succeed in this market. Imposing a regulatory pressure on CRAs weakens their motivation to inflate ratings to win market shares. Their rating strategies also vary across economic cycles. Key
Original languageEnglish
Publication statusUnpublished - 2018
EventThe Seventeenth European Economics and Finance Society Conference - City University of London, London, United Kingdom
Duration: 21 Jun 201824 Jun 2018


ConferenceThe Seventeenth European Economics and Finance Society Conference
Abbreviated titleEEFS conference
Country/TerritoryUnited Kingdom
Internet address


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