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European versus Anglo-Saxon Credit View: Evidence from the Eurozone Sovereign Debt Crisis

We analyse whether different levels of country ties to Europe among the rating agencies Moody’s, S&P, and Fitch affect the assignment of sovereign credit ratings, using the Eurozone sovereign debt crisis of 2009-2012 as a natural laboratory. We find that Fitch, the rating agency among the “Big Three” with significantly stronger ties to Europe compared to its two more US-tied peers, assigned on average more favourable ratings to Eurozone issuers during the crisis. However, Fitch’s better ratings for Eurozone issuers seem to be neglected by investors as they rather follow the rating actions of Moody’s and S&P. Our results thus doubt the often proposed need for an independent European credit rating agency.

15. Dezember 2016

Autoren Marc Altdörfer Carlos A. De las Salas Vega Andre Guettler Gunter Löffler

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The Case for a European Rating Agency: Evidence from the Eurozone Sovereign Debt Crisis

Marc Altdörfer Carlos A. De las Salas Vega Andre Guettler Gunter Löffler

in: Journal of International Financial Markets, Institutions and Money, 2019

Abstract

Politicians frequently voice that European bond issuers would benefit from the presence of a Europe-based rating agency. We take Fitch as a prototype for such an agency. With its ownership structure and a headquarter in London, Fitch is more European than Moody’s and S&P; during the Eurozone sovereign debt crisis, it also issued more favorable ratings. Fitch’s rating actions, however, were largely ignored by the bond market. Our results thus cast doubt on the benefits of a European credit rating agency.

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