South Africa mining sector restructuring will hasten

2016 ◽  
Keyword(s):  
South Africa ◽  
Policy Implementation ◽  
Credit Rating ◽  
Court Ruling ◽  
Content Type ◽  
Credit Rating Agency ◽  
Price Hike ◽  
De Beers ◽  
Strong Performance ◽  
Anglo American

Significance The threat of future strikes is a blow to government attempts to address investor unease, which it is seeking to do by soothing tensions between unions and miners, and improving clarity regarding the sector's governing legislation. Impacts The recent court ruling against Zuma regarding tax-funded upgrades to his home will strengthen factions urging his resignation. Credit rating agency concerns that intra-ANC wrangling will hurt policy implementation could hasten a downgrade to 'junk' status. Zimbabwe is likely to pursue stricter HDI ownership requirements than South Africa, driving some investment southwards. De Beers' strong performance following a recent 2% diamond price hike will help to improve returns for parent company Anglo American.

Do managers manipulate earnings to influence credit rating agencies’ decisions?

2017 ◽  
Vol 16 (3) ◽  
pp. 366-384
Author(s):  
Qiuhong Zhao
Keyword(s):  
Earnings Management ◽  
Credit Rating ◽  
Conflicts Of Interest ◽  
Real Earnings Management ◽  
Management Behavior ◽  
Wall Street ◽  
Content Type ◽  
Credit Rating Agency ◽  
Rating Agency ◽  
Management Measures

Purpose This study aims to investigate whether firms engage in earnings management behavior that attempts to manipulate Credit Rating Agency (CRA) perceptions during the Watchlist process and, if so, whether earnings management behavior appears to influence CRAs’ decisions. Design/methodology/approach To measure earnings management activities, this paper computes accrual-based and real earnings management measures in the year or in the quarter immediately before the Watchlist resolutions for all negative and positive Watchlist firms. To examine the association between the levels of earnings management and Watchlist resolutions, a logit model is applied to the data obtained from a sample of Watchlist firms. Findings Some evidence suggests that managers in Watchlist firms manage earnings in attempts to gain favorable Watchlist treatment. The findings are consistent with the Graham et al.’s (2005) survey evidence, which shows that one of the primary reasons for earnings management is to gain (or preserve) a desirable rating. In addition, CRAs appear to be misled by these attempts during the negative Watchlist process period. Research limitations/implications The findings support SEC’s (2011, 2013a, 2013b) rules to reduce its reliance on credit ratings and the recent regulation reforms concerning the competition in the rating industry [the Credit Rating Agency Reform Act (2006)], and concerning conflicts of interest of CRAs among others [Dodd–Frank Wall Street Reform and Consumer Protection Act (2010)]. Originality/value While many studies examine whether managers use discretionary accruals as a tool to manage earnings to obtain favorable ratings, those studies do not consider manipulation of real operating activities to manage earnings and CRA perceptions.

Governance in Brazil will become more challenging

2015 ◽  
Keyword(s):  
Policy Making ◽  
Foreign Currency ◽  
Credit Rating ◽  
New Right ◽  
The Political ◽  
Content Type ◽  
Credit Rating Agency ◽  
Foreign Currency Debt ◽  
Spending Cuts ◽  
Ability And Willingness

Significance When credit rating agency Standard & Poor's downgraded Brazil's foreign currency debt to 'junk' status on September 9, it cited "political challenges" "weighing on the government's ability and willingness to submit a 2016 budget to Congress" consistent with its objective of rebalancing its books. This exemplifies Brazil's serious governance problems, which affect different areas of policy-making. Impacts Spending cuts will further undermine Rousseff's congressional support. A new right is emerging with a traditional liberal agenda. The political reform under discussion does not address key governance issues.

ICC ruling could expose South African judiciary

2017 ◽  
Keyword(s):  
South Africa ◽  
South African ◽  
Court Ruling ◽  
Content Type

Headline SOUTH AFRICA: Court ruling could expose judiciary

Court ruling will help Ramaphosa keep populists at bay

2020 ◽  
Keyword(s):  
South Africa ◽  
Court Ruling ◽  
Content Type

Headline SOUTH AFRICA: Court ruling will help Ramaphosa's cause

Cities will be South Africa's key vote battlegrounds

2016 ◽  
Keyword(s):  
South Africa ◽  
Rural Areas ◽  
Economic Activity ◽  
Social Spending ◽  
Constitutional Court ◽  
Court Ruling ◽  
Tax Base ◽  
Electoral Roll ◽  
Municipal Elections ◽  
Content Type

Subject Outlook for municipal elections in South Africa. Significance Municipal elections are due between May 18 and August 16. Last November, a Constitutional Court ruling stated that voters' postal addresses must accompany entries on the electoral roll in order to prevent irregularities. It has already forced several by-elections to be annulled and will likely cause difficulties for the upcoming polls. Impacts Policies pursued by municipalities will prove nationally significant -- since the eight largest account for 59% of total economic activity. If it experiences major losses in cities, the ANC may shore up its base by prioritising social spending in rural areas. Urban voters are more likely than rural ones to be aggrieved by fiscal leakage because they make a larger contribution to the tax base.

The European rating fund

2018 ◽  
Vol 26 (1) ◽  
pp. 72-86 ◽  
Author(s):  
Dirk-Hinnerk Fischer
Keyword(s):  
Credit Rating ◽  
Conflicts Of Interest ◽  
Market Reform ◽  
The European Union ◽  
Content Type ◽  
Credit Rating Agency ◽  
New Public ◽  
Communication Layer ◽  
Practical Implications ◽  
Public Entity

Purpose The complexity of the financial markets and their controlling entities make structural reforms highly problematic and controversial. This paper aims to address the deficiencies of the credit rating agency (CRA) market. The contribution of this paper to this long and ongoing discussion is a reform concept that is based on the introduction of a new public entity. Design/methodology/approach The design is based on the market deficiencies and structural issues defined by numerous other researchers. Findings The proposed market reform is based on the introduction of an entity that mainly acts as a communication layer which takes over the contract distribution and payment organization between the issuers and the agencies. The distribution of products for ratings gets anonymized and randomized, which eliminates most conflicts of interest that prevent the market players from performing as they should. This process changes the market fundamentally, but it does not impact either side’s capacity to make profit. Research limitations/implications The concept can hence solve most issues of the market, but not all. Practical implications The concept is a first step toward necessary reform, and this paper fuels a new discussion about a valid CRA market reform. The reform proposal mentioned in this paper focuses on the European Union, but the structure is easily adaptable to other markets. Originality/value The structure introduced in this paper is a new concept that has not been proposed before.

The impact of market sectors and rating agencies on credit ratings: global evidence

2019 ◽  
Vol 20 (5) ◽  
pp. 389-410
Author(s):  
Kerstin Lopatta ◽  
Magdalena Tchikov ◽  
Finn Marten Körner
Keyword(s):  
Credit Risk ◽  
Credit Rating ◽  
Credit Ratings ◽  
Content Type ◽  
Rating Agencies ◽  
Credit Rating Agency ◽  
Rating Agency ◽  
Investment Grade ◽  
The Impact ◽  
Rating Downgrades

Purpose A credit rating, as a single indicator on one consistent scale, is designed as an objective and comparable measure within a credit rating agency (CRA). While research focuses mainly on the comparability of ratings between agencies, this paper additionally questions empirically how CRAs meet their promise of providing a consistent assessment of credit risk for issuers within and between market segments of the same agency. Design/methodology/approach Exhaustive and robust regression analyses are run to assess the impact of market sectors and rating agencies on credit ratings. The examinations consider the rating level, as well as rating downgrades as a further measure of empirical credit risk. Data stems from a large global sample of Bloomberg ratings from 11 market sectors for the period 2010-2018. Findings The analyses show differing effects of sectors and agencies on issuer ratings and downgrade probabilities. Empirical results on credit ratings and rating downgrades can then be attributed to investment grade and non-investment grade ratings. Originality/value The paper contributes to current finance research and practice by examining the credit rating differences between sectors and agencies and providing assistance to investors and other stakeholders, as well as researchers, how issuers’ sector and rating agency affiliations act as relative metrics.

A Bayesian inference model for the credit rating scale

2016 ◽  
Vol 17 (4) ◽  
pp. 390-404 ◽  
Author(s):  
Philipp Gmehling ◽  
Pierfrancesco La Mura
Keyword(s):  
Bayesian Inference ◽  
Credit Risk ◽  
Credit Rating ◽  
Rating Scale ◽  
Credit Rating Agencies ◽  
Model Framework ◽  
Content Type ◽  
Rating Agencies ◽  
Credit Rating Agency ◽  
Limited Accuracy

Purpose This paper aims to provide a theoretical explanation of why credit rating agencies typically disclose credit risk of issuers in classes rather than publishing the qualitative ranking those classes are based upon. Thus, its goal is to develop a better understanding of what determines the number and size of rating classes. Design/methodology/approach Investors expect ratings to be sufficiently accurate in estimating credit risk. In a theoretical model framework, it is therefore assumed that credit rating agencies, which observe credit risk with limited accuracy, are careful in not misclassifying an issuer with a lower credit quality to a higher rating class. This situation is analyzed as a Bayesian inference setting for the credit rating agencies. Findings A disclosure in intervals, typically used by credit rating agencies results from their objective of keeping misclassification errors sufficiently low in conjunction with the limited accuracy with which they observe credit risk. The number and size of the rating intervals depend in the model on how much accuracy the credit rating agencies can supply. Originality/value The paper uses Bayesian hypothesis testing to illustrate the link between limited accuracy of a credit rating agency and its disclosure of issuers’ credit risk in intervals. The findings that accuracy and the objective of avoiding misclassification determine the rating scale in this theoretical setting can lead to a better understanding of what influences the interval disclosure of major rating agencies observed in practice.

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