PL EN
 
PL EN
Current Issue
Past Issues
About the Journal
For Authors
Contact Us
1/2021 vol. 305
Stats
CC-BY 4.0
Get citation
RESEARCH PAPER
Market-Implied Rating and Bank Funding Costs for Warsaw Stock Exchange-Listed Banks
Marcin Borsuk 1
,
 
Błażej Lepczyński 2
 
 
 
More details
Hide details
1
Instytut Nauk Ekonomicznych PAN, Polska
 
2
Wydział Zarządzania, Uniwersytet Gdański, Polska
 
 
Submission date: 2020-04-27
 
 
Final revision date: 2020-10-18
 
 
Acceptance date: 2021-01-16
 
 
Publication date: 2021-03-31
 
 
Corresponding author
Błażej Lepczyński   

Wydział Zarządzania, Uniwersytet Gdański, Polska
 
 
GNPJE 2021;305(1):87-109
DOI: https://doi.org/10.33119/GN/132487
 
 
Article (PDF)
References (48)
 
KEYWORDS
implied rating
funding cost
credit risk
banks
 
JEL CLASSIFICATION CODES
C58
G21
 
ABSTRACT
The objective of this study is to investigate the impact of ratings on the funding costs of banks listed on the Warsaw Stock Exchange. We use the so-called implied rating, which can be treated as a substitute for ratings assigned by rating agencies. A characteristic feature of the implied rating is that it is calculated on the basis of equity market prices, making it suitable for linking the current market assessment with the financial soundness of banks. Based on a panel regression model of banks listed on the Warsaw Stock Exchange in 2007-2018, we show that there is a statistically significant negative relationship between the implied rating and the cost of financing a bank. Moreover, this relationship is non-linear and its strength varies depending on the bank’s ownership structure.
REFERENCES (48)
1.
Andrews A. M. [2005], State-Owned Banks, Stability, Privatization, and Growth: Practical Policy Decisions in a World Without Empirical Proof, IMF Working Paper, International Monetary Fund.
Google Scholar
 
 
2.
Adelino M., Ferreira M. A. [2016], Bank Ratings and Lending Supply: Evidence from Sovereign Downgrades, The Review of Financial Studies, 29 (7), 1709–1746.
Google Scholar
 
 
3.
Almeida H., Cunha I., Ferreira M. A., Restrepo F. [2016], The Real Effect of Credit Ratings: The Sovereign Ceiling Channel, The Journal of Finance, https://ssrn.com/abstract=2349..., dostęp: 1.10.2020.
Google Scholar
 
 
4.
Andersson M., Kok C., Mirza H., Móré C., Mosthaf J. [2018], How can euro area banks reach sustainable profitability in the future?, Special Feature, Financial Stability Review, ECB.
Google Scholar
 
 
5.
Arnould G., Pancaro C., Żochowski D. [2020], Bank funding costs and solvency, Working Paper Series No 2356, ECB.
Google Scholar
 
 
6.
Babihuga R., Spaltro M. [2014], Bank Funding Costs for International Banks, IMF Working Paper WP/14/71.
Google Scholar
 
 
7.
Bhargava A., Sargan J. D. [1983], Estimating dynamic random effects models from panel data covering short time periods, Econometrica 51, 1635–1659.
Google Scholar
 
 
8.
Bloch D. [2014], Klauzule rating triggers oraz zagrożenie dla stabilności rynku z nich wynikające, Acta Universitatis Lodziensis, Folia Oeconomica, 2 (301): 19–28.
Google Scholar
 
 
9.
Borsuk M. [2017], Implikowany koszt kapitału w polskim sektorze bankowym, Zarządzanie i Finanse, 15 (1): 5–16.
Google Scholar
 
 
10.
Cull R., Peria M., Verrier J. [2017], Bank Ownership: Trends and Implications, IMF Working Paper, WP/17/60, International Monetary Fund.
Google Scholar
 
 
11.
Default Risk: Dig deeper, see more, Bloomberg.
Google Scholar
 
 
12.
EBA [2018], Risk Assessment Questionnaire – Summary of the Results.
Google Scholar
 
 
13.
Frei Ch. [2017], Modeling Credit Risk of Loan Portfolios in the Presence of Autocorrelation (Part 2), Practitioner Seminar in Financial and Insurance Mathematics, UBS.
Google Scholar
 
 
14.
Garcia-de-Andoain C., Kremer M. [2017], Beyond spreads: Measuring sovereign market stress in the euro area, Economics Letters, 159: 153–156.
Google Scholar
 
 
15.
Gori E., Gori G. [2017], Credit ratings: a new objective method using the Rasch model, Universita Degli Studi di Udine.
Google Scholar
 
 
16.
Hau H., Langfield S., Marques-Ibanez D. [2012], Bank ratings. What determines their Quality, European Central Bank: Working Paper Series No. 1484.
Google Scholar
 
 
18.
Iannotta G., Nocera G., Sironi A. [2013], The Impact of Government Ownership on Bank Risk, Journal of Financial Intermediation, 22: 152–176.
Google Scholar
 
 
19.
Johnson M., Leggio K., Shin Y. S. [2018], Assessment of Credit Risk Models on Rule 144A Corporate Bonds, http://www.fmaconferences.org/..., dostęp: 1.10.2020.
Google Scholar
 
 
20.
Karam P., Merrouche O., Souissi M., Turk R. [2015], Real effect of credit rating downgrades, VOX CEPR Policy Portal.
Google Scholar
 
 
21.
Karam P., Merrouche O., Souissi M., Turk R. [2014], The Transmission of Liquidity Shocks: The Role of Internal Capital Market and Bank Funding Strategies, IMF Working Paper, WP/14/207.
Google Scholar
 
 
22.
Kerry W. [2019], Finding the Bad Apples in the Barrel: Using the Market Value of Equity to Signal Banking Sector Vulnerabilities, Working Paper No. 19/180.
Google Scholar
 
 
23.
Kim S-J., Wu E. [2011], International bank flows to emerging markets: Influence of sovereign.
Google Scholar
 
 
24.
credit ratings and their regional spillover effects, Journal of Financial Research, 34 (2).
Google Scholar
 
 
25.
Kisgen D. J. [2003], Credit Ratings and Capital Structure, https://pdfs.semanticscholar.o....
Google Scholar
 
 
26.
be6d/411165d083606d5adb35d3b33b935418de7d.pdf.
Google Scholar
 
 
27.
KNF [2019], Informacja na temat sytuacji sektora bankowego.
Google Scholar
 
 
28.
Kou J., Varotto S. [2005], Predicting Agency Rating Migrations with Spread Implied Ratings, ISMA Centre Discussion Papers in Finance DP2005–06.
Google Scholar
 
 
29.
Kripfganz S. [2016], Quasi – maximum Likelihood Estimation of Linear Dynamic Short-T panel-data Models, The Stata Journal: 107–150.
Google Scholar
 
 
30.
Langohr H., Langohr R. [2008], The rating agencies and their credit ratings. What They Are, How They Work, And Are They Are Relevant, WILEY, John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester,West Sussex PO19 8SQ, England.
Google Scholar
 
 
31.
Le Lesle V. [2012], Bank debt in Europe. Are funding models broken, IMF Working Paper 12/299, IMF.
Google Scholar
 
 
32.
Levy-Yeyati E., Micco A., Panizza U. [2004], State-Owned Banks: Do They Promote or Depress Finan¬cial Development and Economic Growth?, https://ssrn.com/abstract=6293..., dostęp: 1.10.2020.
Google Scholar
 
 
33.
Łuczka T. [2009], Filozofia ratingu a wielkość przedsiębiorstwa, Ekonomiczne Problemy Usług, 34: 646–653.
Google Scholar
 
 
34.
Mensah M. O., Agbloyor E. K., Harvey S. K., Fiador V. O. [2017], Sovereign credit ratings and bank funding cost: Evidence from Africa, Research in International Business and Finance, 42.
Google Scholar
 
 
35.
KNF [2020], Informacja na temat sytuacji sektora finansowego, Warszawa.
Google Scholar
 
 
36.
NBP [2019], Raport o stabilności systemu finansowego, Warszawa.
Google Scholar
 
 
37.
OECD [2010], Competition and Credit Rating Agencies.
Google Scholar
 
 
38.
Panetta F. [2011], The impact of sovereign credit risk on bank funding conditions, CGFS Papers No. 43, Committee on the Global Financial System.
Google Scholar
 
 
39.
Poon W. P. H., Hasan I., Zhang G., Shen J. [2016], Are market implied ratings viable alterna¬tives to credit ratings?, http://www.fmaconferences.org/..., dostęp: 1.10.2020.
Google Scholar
 
 
40.
Raiffeisen RESEARCH [2019], CEE Banking Sector Report 2019.
Google Scholar
 
 
41.
Rhee R. J. [2014], Incentivizing Credit Rating Agencies under the Issuer Pay Model Through a Man¬datory Compensation Competition, Banking&Financial Services Policy Report, 33 (4): 1–11.
Google Scholar
 
 
42.
Schich S., Lindh S. [2012], Implicit Guarantees for Bank Debt: Where do We Stand?, OECD Journal: Financial Market Trends, 2 (1): 1–22.
Google Scholar
 
 
43.
Schultz E. L., Tan D. T., Walsh K. D. [2010], Endogeneity and the corporate governance – perfor¬mance relation, Australian Journal of Management, 35 (2): 145–163.
Google Scholar
 
 
44.
Smith J. A., Grill M., Lang J. H. [2017], The leverage ratio, risk-taking and bank stability, Working Paper Series No. 2079, ECB.
Google Scholar
 
 
45.
Tsoukas S., Spaliara M-E. [2014], Market Implied Ratings and Financing Constraints: Evidence from US Firms, Journal of Business Finance & Accounting, 41 (1–2): 242–269.
Google Scholar
 
 
46.
Wooldridge J. M. [2010], Econometric Analysis of Cross Section and Panel Data, MIT Press.
Google Scholar
 
 
47.
ZBP [2019], Polska i Europa – wyzwania i ograniczenia 2019, wydanie VI.
Google Scholar
 
 
48.
Wooldridge J. M. [2001], Applications of Generalized Method of Moment Estimation, Journal of Economic Perspectives, 15: 87–100.
Google Scholar
 
 
Share
Send by email
RELATED ARTICLE
Macroeconomic Factors and Consumer Loan Repayment
Polish Enterprises as Borrowers: A Look at Bank Strategies from the Other Side of the Mirror
Banking Sector Mergers & Acquisitions and the Development of Small and Medium-Sized Enterprises
Technological Competition Among Poland’s Largest Banks
The Ownership Structure and Technological Efficiency of Poland’s Largest Banks
Indexes
 
Keywords index
JEL Classification Codes index
Authors index
eISSN:2300-5238
Journals System - logo
The system was developed as part of the task "Digitization of the journal Gospodarka Narodowa," financed under contract 555/P-DUN/2018 from the Ministry of Science and Higher Education funds allocated from the dissemination of science.

© 2006-2024 Journal hosting platform by Bentus
Scroll to top