Rating Performance and Bank Business Models: Is There a Change with the 2007-2009 Crisis?
33 Pages Posted: 9 Sep 2014
Date Written: September 8, 2014
We investigate the relationship between a bank’s rating and its business model and hypothesize that relationship changed through the crisis. We use bank ratings by Fitch, Moody’s and S&P’s from 2006 to 2009 and proxy the business model via an index given by a banks’ traditional income share in total income. In a sample of 241 listed banks from 39 countries, controlling for sovereign ratings and other bank characteristics, we find that banks with higher values of the index had: i) similar ratings to other banks until 2007; ii) better rating performance through 2008-2009. The evidence supports our hypothesis.
Keywords: Financial Crises, Financial Markets, Ratings, Banks Business Model
JEL Classification: G1, G15, G21, G24
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