'Bank systemic risk: An analysis of the sovereign rating ceiling policy and rating downgrades
We investigate the impact that the sovereign ceiling policy has on financial stability. In the event of a sovereign rating downgrade, we find that the rating agencies' sovereign ceiling policy leads to a disproportionate downgrade of the most creditworthy financial institutions in the economy a...
| Main Authors: | , , |
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| Format: | Journal Article |
| Published: |
Wiley-Blackwell
2022
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| Online Access: | http://hdl.handle.net/20.500.11937/88673 |
| _version_ | 1848765059414622208 |
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| author | Md Abdul, Wasi Pham, Thu Phuong Ralf, Zurbruegg |
| author_facet | Md Abdul, Wasi Pham, Thu Phuong Ralf, Zurbruegg |
| author_sort | Md Abdul, Wasi |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | We investigate the impact that the sovereign ceiling policy has on financial stability. In the event of a sovereign rating downgrade, we find that the rating agencies' sovereign ceiling policy leads to a disproportionate downgrade of the most creditworthy financial institutions in the economy and results in increased systemic risk. This asymmetric variation in bank ratings also impairs equity growth that further exacerbates bank insolvency. Our results are robust to several matching techniques, such as propensity score matching and entropy balancing, falsification tests, subsample analyses, alternative empirical proxies and model specifications. |
| first_indexed | 2025-11-14T11:29:14Z |
| format | Journal Article |
| id | curtin-20.500.11937-88673 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T11:29:14Z |
| publishDate | 2022 |
| publisher | Wiley-Blackwell |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-886732024-06-18T00:05:52Z 'Bank systemic risk: An analysis of the sovereign rating ceiling policy and rating downgrades Md Abdul, Wasi Pham, Thu Phuong Ralf, Zurbruegg We investigate the impact that the sovereign ceiling policy has on financial stability. In the event of a sovereign rating downgrade, we find that the rating agencies' sovereign ceiling policy leads to a disproportionate downgrade of the most creditworthy financial institutions in the economy and results in increased systemic risk. This asymmetric variation in bank ratings also impairs equity growth that further exacerbates bank insolvency. Our results are robust to several matching techniques, such as propensity score matching and entropy balancing, falsification tests, subsample analyses, alternative empirical proxies and model specifications. 2022 Journal Article http://hdl.handle.net/20.500.11937/88673 10.1111/jbfa.12637 Wiley-Blackwell fulltext |
| spellingShingle | Md Abdul, Wasi Pham, Thu Phuong Ralf, Zurbruegg 'Bank systemic risk: An analysis of the sovereign rating ceiling policy and rating downgrades |
| title | 'Bank systemic risk: An analysis of the sovereign rating ceiling policy and rating downgrades |
| title_full | 'Bank systemic risk: An analysis of the sovereign rating ceiling policy and rating downgrades |
| title_fullStr | 'Bank systemic risk: An analysis of the sovereign rating ceiling policy and rating downgrades |
| title_full_unstemmed | 'Bank systemic risk: An analysis of the sovereign rating ceiling policy and rating downgrades |
| title_short | 'Bank systemic risk: An analysis of the sovereign rating ceiling policy and rating downgrades |
| title_sort | 'bank systemic risk: an analysis of the sovereign rating ceiling policy and rating downgrades |
| url | http://hdl.handle.net/20.500.11937/88673 |