Are credit rating agencies regionally biased?


ECONOMIC SYSTEMS, vol.42, no.4, pp.682-694, 2018 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 42 Issue: 4
  • Publication Date: 2018
  • Doi Number: 10.1016/j.ecosys.2018.08.001
  • Journal Name: ECONOMIC SYSTEMS
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus
  • Page Numbers: pp.682-694
  • Keywords: Sovereign ratings, Credit rating agencies, Credit risk, Seemingly unrelated regressions, SOVEREIGN RISK RATINGS, DEMOCRATIC ADVANTAGE, DETERMINANTS, MODELS, DEBT
  • Hacettepe University Affiliated: Yes


We investigate claims of regional bias in the sovereign credit ratings given by the rating agencies Fitch, Moody's and Standard & Poor's by considering a wide range of macroeconomic, financial, institutional, regional and geopolitical indicators for 99 countries categorized into eight regions plus the United States. Empirical results based on seemingly unrelated regressions indicate a strong home country bias towards the United States, while there seem to be no special biases against individual groups of countries. We also demonstrate how modeling errors such as omitted variables can increase dispersion in the estimated regional effects, causing agencies to appear biased.