Ordered choice models of international banks' ratings with an indicator variable for country effects

Matousek, Roman and Stewart, Chris (2008) Ordered choice models of international banks' ratings with an indicator variable for country effects. Centre for International Capital Markets discussion papers, 2008 (14). pp. 1-27. ISSN 1749-3412

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Abstract

Using data on international banks’ ratings we find that banks with a greater capitalisation, larger assets, and a higher return on assets have higher bank ratings. Further, the more a bank’s liquidity increased in the past the greater is its rating, the larger is the ratio of its operating expenses to total operating income the lower is its rating and the more recent is the date that the rating is made the lower is the rating of the bank. There is also a strong country effect on bank ratings such that banks from certain countries have systematically higher ratings than others. The addition of this variable substantially raises the model’s accuracy at predicting a bank’s rating which is arguably the major challenge of modelling ratings. The inclusion and modelling of country-effects represents a notable innovation of this study.

Item Type: Article
Uncontrolled Keywords: Centre for International Capital Markets discussion papers; CICM discussion papers; international bank ratings; ordered choice models; country indicator variable
Subjects: 300 Social sciences > 330 Economics
Department: Guildhall School of Business and Law
Depositing User: Mary Burslem
Date Deposited: 22 Apr 2015 13:59
Last Modified: 22 Apr 2015 13:59
URI: http://repository.londonmet.ac.uk/id/eprint/477

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