Publications
Publications
- 2020
- HBS Working Paper Series
Going Local: The Effects of a Local Presence by Global Rating Agencies
By: Liran Eliner, Anywhere Sikochi and Suraj Srinivasan
Abstract
This paper examines whether and how corporate credit ratings change when global credit rating agencies establish a local presence in countries outside the United States. We show that a local presence is associated with higher credit ratings for local firms. Subsequent results reveal that the rating increase appears to be driven by a decrease in negative rating adjustments and an increase in positive adjustments. We interpret these findings as evidence that after a local presence rating analysts are more likely to assign higher ratings through rating adjustments and are less likely to make negative rating adjustments. Subsequent analyses suggest that, akin to the market for lemons, credit ratings increase rather than decrease because of general downward bias for ratings when analysts are unable or lack confidence to distinguish between good and bad credit quality firms.
Keywords
Credit Rating Agencies; Credit Ratings; Rating Adjustments; Rating Disagreement; Geographic Proximity; Soft Information; Credit; Geographic Location; Local Range
Citation
Eliner, Liran, Anywhere Sikochi, and Suraj Srinivasan. "Going Local: The Effects of a Local Presence by Global Rating Agencies." Harvard Business School Working Paper, No. 20-083, February 2020.
About The Authors
