Politicians and Sovereign Credit Ratings

62 Pages Posted: 30 Mar 2021

See all articles by Patrycja Klusak

Patrycja Klusak

Bennett Institute for Public Policy, University of Cambridge; Norwich Business School

Yurtsev Uymaz

University of East Anglia, Norwich Business School

Rasha Alsakka

Bangor Business School

Date Written: August 4, 2020

Abstract

Using a unique hand collected sample of professional connections between finance ministers and the directors and top executives of the three largest credit rating agencies for 38 European sovereigns between January 2000 and November 2017, we show that professional connections result in higher sovereign ratings. We find that the subjective component of ratings, captured by the current professional connection, has a more important role for developing than developed countries, whereby the average effect in developing European countries is estimated to be about 1.18, 0.38, and 0.80 notch by S&P, Moody’s and Fitch respectively. We also reveal that solicited sovereign ratings are significantly higher than unsolicited ratings.

Keywords: Sovereign credit ratings, Professional connections, Rating solicitation

JEL Classification: F3, F5, G2, G3

Suggested Citation

Klusak, Patrycja and Uymaz, Yurtsev and Alsakka, Rasha, Politicians and Sovereign Credit Ratings (August 4, 2020). Available at SSRN: https://ssrn.com/abstract=3814957 or http://dx.doi.org/10.2139/ssrn.3814957

Patrycja Klusak (Contact Author)

Bennett Institute for Public Policy, University of Cambridge ( email )

First Floor
17 Mill Lane
Cambridge, CB2 1RX
Great Britain

Norwich Business School ( email )

Norwich Research Park
Norwich, Norfolk NR4 7TJ
United Kingdom

HOME PAGE: http://https://www.uea.ac.uk/norwich-business-school/people/profile/p-klusak

Yurtsev Uymaz

University of East Anglia, Norwich Business School ( email )

Norwich
NR4 7TJ
United Kingdom

Rasha Alsakka

Bangor Business School ( email )

Bangor Business School
College Road
Gwynedd LL57 2DG, Wales LL57 2DG
United Kingdom

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