Statistical analysis of assigning a corporate credit rating considering the sovereign rating in the Russian Federation

Journal of Corporate Finance Research. 2022. Vol. 16. No. 1. P. 65–82.

Kopnova E., Gracheva A.

In emerging market economies, public debt affects the national economy through a vast array of channels, the effect of which could be unobvious, but significant. The least obscure channel is the impact of the sovereign rating on corporate creditworthiness. In the Russian– language scientific literature, this aspect is scantly represented by papers that research the determinants of sovereign and corporate ratings, but the link between the ratings is not considered (see e.g. [Anokhin, 2011; Karminsky, 2011; Kuchiev, Kuchieva, 2013]).

In this paper, we have studied the impact of microeconomic determinants of a company’s credit rating, taking into account the sovereign rating and other macroeconomic factors. The research is based on 19 non–financial companies in Russia’s leading industries for 2014–2018. It is shown that the sovereign credit rating, despite the sovereign “ceiling” rule was lited by the rating agencies Fitch, Moody’s and S&P in 1997, remains closely correlated to the risk level of Russian companies. The obtained results related to macroeconomic and idiosyncratic risk indicators indicate the peculiarities of credit rating forming for Russian companies. In particular, in contrast to the results of similar studies, the negative effect of certain profitability and liquidity variables, as well as the country’s foreign trade turnover on the corporate rating’s level have been revealed. It is discovered that the credit rating has a “short memory” – its current value is historically determined only by the level of the previous period.

This paper is of practical relevance for private and institutional investors and lenders, which use credit ratings to form their own perception of the default risk level in the corporate sector.

Keywords: кредитный рейтинг, credit ratings, Sovereign Ceiling, Sovereign Risk, Corporate Risk, Risk Transmission, Суверенный «потолок», Суверенный риск, Корпоративный риск, Трансмиссия риска