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Risks 2018, 6(4), 130;

National Culture and Corporate Rating Migrations

Department of Economics and Finance, University of Canterbury, Christchurch 8140, New Zealand
Received: 14 October 2018 / Revised: 6 November 2018 / Accepted: 7 November 2018 / Published: 14 November 2018
(This article belongs to the Special Issue Risk, Ruin and Survival: Decision Making in Insurance and Finance)
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The informal constraints that arise from the national culture in which a firm resides have a pervasive impact on managerial decision making and corporate credit risk, which in turn impacts on corporate ratings and rating changes. In some cultures, firms are naturally predisposed to rating changes in a particular direction (downgrade or upgrade) while, in other cultures, firms are more likely to migrate from the current rating in either direction. This study employs a survival analysis framework to examine the effect of national culture on the probability of rating transitions of 5360 firms across 50 countries over the period 1985–2010. Firms located in long-term oriented cultures are less likely to be downgraded and, in some cases, more likely to be upgraded. Downgrades occur more often in strong uncertainty-avoiding countries and less often in large power distance (hierarchy) and embeddedness countries. There is some evidence that masculinity predisposes firms to more rating transitions. Studying culture helps enrich our understanding of corporate rating migrations, and helps develop predictive models of corporate rating changes across countries. View Full-Text
Keywords: national culture; survival analysis; hazard model; rating migrations national culture; survival analysis; hazard model; rating migrations

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Dang, H.D. National Culture and Corporate Rating Migrations. Risks 2018, 6, 130.

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