Market structure and rating strategies in credit rating markets – A dynamic model with matching of heterogeneous bond issuers and rating agencies

2015 ◽  
Vol 58 ◽  
pp. 39-56 ◽  
Author(s):  
Thomas Fischer
Keyword(s):  
Market Structure ◽  
Dynamic Model ◽  
Credit Rating ◽  
Rating Agencies ◽  
Bond Issuers

AssessingSukukdefaults using value-at-risk techniques

2018 ◽  
Vol 44 (6) ◽  
pp. 665-687 ◽  
Author(s):  
Nafis Alam ◽  
Muhammad Bhatti ◽  
James T.F. Wong
Keyword(s):  
At Risk ◽  
Value At Risk ◽  
Credit Rating ◽  
Secondary Market ◽  
Economic Sectors ◽  
Content Type ◽  
Rating Agencies ◽  
Bond Issuers ◽  
Research Findings ◽  
Fundamental Value

PurposeThe purpose of this paper is to investigate the default characteristics of Sukuk issues by corporate firms in Malaysia using value-at-risk (VaR) techniques over a period of 16 years from 2000 to 2015 and across nine economic sectors.Design/methodology/approachThe paper employs non-parametric and Monte Carlo simulations to estimate Sukuk defaults.FindingsThe authors analyses revealed that the VaR predictions were fairly consistent with the ratings provided by credit rating agencies, despite the limited tradability of Sukuk in the secondary market. The study was able to demonstrate that Sukuk is not riskier than conventional bonds in the Malaysian context.Research limitations/implicationsThe research findings suggested that VaR values will depend on the fundamental value of a firm based on the considerations of market, credit and operational risk. It does not rely on the type of debt instrument, whether a Sukuk or conventional bonds.Practical implicationsThe use of Sukuk along with conventional bonds as debt instruments creates opportunities for investors and bond issuers globally.Originality/valueAlthough Sukuk has generated much interest among financial market players, studies are lacking on how to predict Sukuk defaults and whether Sukuk has the same risk profile compared to conventional bonds.

Green Certification, Credit Rating, and Mainland Chinese Green Bonds in Hong Kong

2022 ◽  
pp. 131-149
Author(s):  
Chak Sham Wong ◽  
Stan H. M. Ho
Keyword(s):  
Hong Kong ◽  
Credit Rating ◽  
Assessment Framework ◽  
Case Study Method ◽  
Mainland Chinese ◽  
Rating Agencies ◽  
Bond Issuers ◽  
Global Investors ◽  
Green Certification

This chapter discusses green certification and credit rating on Mainland Chinese green bonds in Hong Kong. These green bonds are mostly denominated in USD, distributed to global investors, and issued with international practices of green certification and credit rating. Using qualitative analysis and case study method, the chapter finds four external reviewers sharply different in their assessment framework although they attempt to assess degree of compliance of a bond issuance or a bond issuer with some international green standards. All the three global credit rating agencies claim their incorporation of green assessment into their credit rating process. However, the chapter finds no clear evidence on such claim from their credit rating comments on selected bond issuers.

scholarly journals The Effect of Reputation Shocks to Rating Agencies on Corporate Disclosures

2018 ◽  
Vol 94 (1) ◽  
pp. 299-326 ◽  
Author(s):  
Mani Sethuraman
Keyword(s):  
Credit Risk ◽  
Voluntary Disclosure ◽  
Credit Rating ◽  
Credit Ratings ◽  
Earnings Forecasts ◽  
Corporate Bond ◽  
Management Earnings Forecasts ◽  
Rating Agencies ◽  
Theoretical Predictions ◽  
Bond Issuers

ABSTRACT This paper explores the effect of a credit rating agency's (CRA) reputation on the voluntary disclosures of corporate bond issuers. Academics, practitioners, and regulators disagree on the informational role played by major CRAs and the usefulness of credit ratings in influencing investors' perception of the credit risk of bond issuers. Using management earnings forecasts as a measure of voluntary disclosure, I find that investors demand more (less) disclosure from corporate bond issuers when the ratings become less (more) credible. In addition, using content analytics, I find that bond issuers disclose more qualitative information during periods of low CRA reputation to aid investors in assessing credit risk. My findings are consistent with credit ratings providing incremental information to investors and reducing adverse selection in lending markets. Further, consistent with theoretical predictions, my findings suggest that managers rely on voluntary disclosure as a credible mechanism to reduce information asymmetry in bond markets.

Effectiveness of Government Regulation of the Banking Sector: Assessment and Rating of Banks

2020 ◽  
pp. 85-95
Author(s):  
Halyna O. Kryshtal
Keyword(s):  
Government Regulation ◽  
Banking Sector ◽  
Credit Rating ◽  
Analytical Data ◽  
The State ◽  
Economic Sector ◽  
Rating Agencies ◽  
Depth Study ◽  
State Regulator ◽  
Almost All

The article deals with the causes of the negative situation in the banking sector, as the state of the bank depends on the analysis of almost all aspects of banking activity for some time. It is determined that during the banking sector audits, the state regulator uses analytical data on the banking sector's operations with its monetary obligations, compliance with maturities and maturities of assets that operate and terms and amounts of liabilities, namely, dealing with banking sector liquidity. As their financial reliability is important in the banking sector, therefore, bank clients are a socio-economic sector, needing an objective and independent assessment, as reliability directly affects the socio-economic development of the country. The banking sector was analyzed in 2016-2019 and it was found that during this period violations of laws and regulations issued by the state regulator were made in the banking sector. A number of penalties, written warnings and administrative penalties were applied by the state regulator. The method of determining the rating of banks in respect of which penalties were applied by the state regulator is proposed. The rating allows investors and potential clients to understand the situation in the banking market and helps banks identify their weaknesses and correct their work. The application of the proposed economic and mathematical model in the rating of participants in the banking sector can have a positive effect on: improving the quality of management in the banking sector and transparency in the activities of each individual bank; standardization of technologies of rating of the banking sector under the prism of the applied sanctions by the state regulator. Therefore, there is a need for an in-depth study of the techniques used by credit rating agencies in the banking sector and the identification of the main problems in establishing the rating of the banking sector. Key words: banking sector, state regulator, economic sector, efficiency, rating, rating, social sector.

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