Stickiness in Bank Credit Ratings

Dimitris Anastasiou, Antonis Ballis, Christos Ioannidis, Steven Ongena and Emmanouil Sifodaskalakis
Additional contact information
Antonis Ballis: Aston Business School, Aston University
Christos Ioannidis: Aston University - Aston Business School
Emmanouil Sifodaskalakis: Eurobank EFG

No 25-63, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We provide new evidence on the behavioral dynamics of credit rating agencies (CRAs) by introducing the concept of asymmetric stickiness in bank credit ratings. Using a comprehensive global dataset covering over 750 banks across 59 countries from 1988 to 2015, we develop a novel empirical framework to measure the extent to which CRAs delay upgrades versus downgrades. Our findings reveal that upgrades are significantly stickier than downgrades across all three major CRAs (Moody's, S&P, and Fitch). Quantitatively, upgrades are on average 3.5 times more persistent than downgrades across all specifications, with the effect most pronounced for Moody's and Fitch. Second, stickiness is not uniform, as Moody's and Fitch ratings are more persistent, particularly for high-rated banks. We further document a new behavioral pattern we term pre-downgrade conservatism, where CRAs assign more conservative ratings immediately before downgrades. These results suggest strategic behavior aimed at preserving reputational capital and mitigating regulatory backlash. We also identify structural breaks in rating behavior coinciding with the 2008 global financial crisis, indicating shifts in CRA methodologies over time. Our results have important implications for the effectiveness of external ratings as supervisory tools and for the procyclicality of credit supply.

Keywords: Credit Rating Agencies; Bank Ratings; Stickiness; Asymmetry; Structural Breaks (search for similar items in EconPapers)
JEL-codes: C35 G21 G23 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2025-07
New Economics Papers: this item is included in nep-fdg
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2563

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