Access to Credit by Firms and Sovereign Credit Rating Stability

Abstract

This paper studies the impact of the number of sovereign credit rating and outlook changes on the access to credit by firms. The data sample consists of 127,000 firms from 139 countries surveyed by World Bank over the period, 2006 to 2016. An ordered logit model is used as a primary tool for empirical analysis. It finds a significant negative relation between the instability of sovereign rating and outlooks; and the access to credit by firms. A collection of sub-sample analyses across rating agencies and country groups validate the results.