Are Bank Ratings Coherent with Bank Default Probabilities in Emerging Market Economies?

27 Pages Posted: 13 Sep 2004

See all articles by Christophe J. Godlewski

Christophe J. Godlewski

University of Strasbourg - Faculty of Law and Business; EM Strasbourg Business School; LaRGE Research Center

Multiple version iconThere are 2 versions of this paper

Date Written: August 2004

Abstract

In this paper we investigate the coherence between bank ratings and default probability in emerging market economies using scoring and mapping techniques.

In order to achieve its disciplining role, the rating should be coherent with the default risk it summarizes and disseminate. This issue is particularly crucial in emerging economies where under-developed financial markets, banking sector accrued opacity, and inadequate regulatory, institutional and legal environment affect banker's risk taking behavior and bank's default risk.

Scoring results show a correct quantification of agency rating grades and thus their coherence. Mapping results show a tendency of the rating to aggregate bank's default risk information into intermediate low category grades.

Keywords: Emerging market economies, default probability, bank rating, scoring and mapping methods

JEL Classification: C35, F39, G21

Suggested Citation

Godlewski, Christophe J., Are Bank Ratings Coherent with Bank Default Probabilities in Emerging Market Economies? (August 2004). Available at SSRN: https://ssrn.com/abstract=588162 or http://dx.doi.org/10.2139/ssrn.588162

Christophe J. Godlewski (Contact Author)

University of Strasbourg - Faculty of Law and Business ( email )

1 place d'Athènes
Strasbourg, 67000
France

HOME PAGE: http://droit.unistra.fr/

EM Strasbourg Business School ( email )

61 Avenue de la Forêt Noire
Strasbourg, 67000
France

HOME PAGE: http://www.em-strasbourg.eu/

LaRGE Research Center ( email )

1 place d'Athènes
Strasbourg, 67000
France

HOME PAGE: http://droit.unistra.fr/

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