European Versus Anglo-Saxon Credit View: Evidence from the Eurozone Sovereign Debt Crisis
IWH Discussion Papers No. 34/2016
44 Pages Posted: 19 Dec 2016
Date Written: December 05, 2016
We analyse whether different levels of country ties to Europe among the rating agencies Moody’s, S&P, and Fitch affect the assignment of sovereign credit ratings, using the Eurozone sovereign debt crisis of 2009-12 as a natural laboratory. We find that Fitch, the rating agency among the “Big Three” with significantly stronger ties to Europe compared to its two more US tied peers, assigned on average more favourable ratings to Eurozone issuers during the crisis. However, Fitch’s better ratings for Eurozone issuers seem to be neglected by investors as they rather follow the rating actions of Moody’s and S&P. Our results thus doubt the often proposed need for an independent European credit rating agency.
Keywords: Credit rating agencies, sovereign debt crisis, rating splits, Eurozone
JEL Classification: F65, G01, G14, G18, G24, H12
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