Understanding sovereign credit ratings : text-based evidence from the credit rating reports

Slapnik, Ursula (author), Lončarski, Igor (author)

We apply a novel approach to identifying the qualitative judgment of the rating committee in sovereign credit ratings by extending the traditional regression with new measures – sentiment and subjectivity scores – obtained by textual sentiment analysis methods. Using an ordered logit with random effects for 98 countries from 1995 to 2018, we find evidence that the subjectivity score provides additional information not captured by previously identified determinants of sovereign credit ratings, even after controlling for political risk, institutional strength, and potential bias. The results from the bivariate and multivariate analysis confirm differences in textual sentiment and subjectivity between emerging markets and advanced economies, as well as before and after the 2008 global financial crisis.

• Language: English
• Keywords: financial markets, financial instruments, investments, price policy, models, sovereign credit ratings, sovereign credit rating reports, textual sentiment analysis, soft information, bias, subjectivity
• Work type: Article
• Typology: 1.01 - Original Scientific Article
• Organization: EF - School of Economics and Business
• Publication status: Published
• Publication version: Version of Record
• Year: 2023
• Number of pages: 29 str.
• Numbering: Vol. 88, art. 101838
• PID: 20.500.12556/RUL-152975
• UDC: 336
• ISSN on article: 1042-4431
• DOI: 10.1016/j.intfin.2023.101838
• COBISS.SI-ID: 165323523
• Publication date in RUL: 13.12.2023

SLAPNIK, Ursula and LONČARSKI, Igor, 2023, Understanding sovereign credit ratings : text-based evidence from the credit rating reports. Journal of international financial markets, institutions & money [online]. 2023. Vol. 88, no. 101838. [Accessed 26 July 2025]. DOI 10.1016/j.intfin.2023.101838. Retrieved from: https://repozitorij.uni-lj.si/IzpisGradiva.php?lang=eng&id=152975

Record is a part of a journal

• Title: Journal of international financial markets, institutions & money
• Publisher: Elsevier
• ISSN: 1042-4431
• COBISS.SI-ID: 2234908

Licences

• License: CC BY-NC 4.0, Creative Commons Attribution-NonCommercial 4.0 International
• Link: http://creativecommons.org/licenses/by-nc/4.0/
• Description: A creative commons license that bans commercial use, but the users don’t have to license their derivative works on the same terms.

Secondary language

• Language: Slovenian
• Keywords: finančni trgi, finančni instrumenti, investicije, politika cen, modeli