Differences of opinion in sovereign credit signals during the European crisis

Motivated by the European debt crisis and the new EU regulatory regime for the credit rating industry, we analyse differences of opinion in sovereign credit signals and their influence on European stock markets. Rating disagreements have a significant connection with subsequent negative credit actions by each agency. However, links among Moody’s/Fitch actions and their rating disagreements with other agencies have weakened in the post-regulation period. We also find that only S&amp;P’s negative credit signals affect the own-country stock market and spill over to other European markets, but this is concentrated in the pre-regulation period. Stronger stock market reactions occur when S&amp;P has already assigned a lower rating than Moody’s/Fitch prior to taking a further negative action.Publisher Statement: This is an Accepted Manuscript of an article published by Taylor &amp; Francis in European Journal of Finance on 02 May 2016, available online: http://www.tandfonline.com/10.1080/1351847X.2016.1177565 </p

Does the disclosure of unsolicited sovereign rating status affect bank ratings?

This paper integrates three themes on regulation, unsolicited credit ratings, and the sovereign-bank rating ceiling. We reveal an unintended consequence of the EU rating agency disclosure rules upon rating changes, using data for S&P-rated banks in 42 countries between 2006 and 2013. The disclosure of sovereign rating solicitation status for 13 countries in February 2011 has an adverse effect on the ratings of intermediaries operating in these countries. Conversion to unsolicited sovereign rating status transmits risk to banks via the rating channel. The results suggest that banks bear a penalty if their host sovereign does not solicit its ratings

Market impact under a new regulatory regime: Credit rating agencies in Europe

We investigate whether there are any identifiable differences in market perceptions of rating news released by Moody’s, S&P and Fitch following the establishment of a new regulatory regime in July 2011, when the European Securities and Markets Authority assumed responsibility for rating agencies’ regulation in Europe. We focus the analysis on the impact of bank rating actions on stock returns and volatility during 2008-2013. Among the intended effects of the new regulatory regime are reduced market impact of rating actions and enhanced market stability, yet we find very mixed evidence. Differentials in market responses across CRAs are identified

Credit rating agencies: Part of the solution or part of the problem?

Credit rating agencies have come under increased scrutiny since the financial crisis. Their failure to recognise the threats to the financial system prior to the crisis coupled with their steady downgrading of European sovereign debt has led to much criticism, especially from European politicians and economists. This Forum examines the major agencies' influence, independence and performance and explores whether a publicly funded European agency would improve the situation

Macroannouncements, Bond Auctions and Rating Actions in the European Government Bond Spreads

This paper investigates the impact of macroannouncements, government bond auctions and rating actions on the 10-year government bond spreads for Belgium, France, Italy, the Netherlands, Spain with respect to Germany. Using a unique tick-by-tick dataset over 1/02/2009–05/31/2012, we identify the impact of the three drivers via jump and cojump detection procedures. Disentangling the pre-from the post-announcement effects, real economy and forward looking news releases from US and Euro area, country specific Spanish and German macroannouncements, and auctions hold in distressed countries such Italy and Spain have a statistically and economically significant effect. No role is played by rating actions

Does competition improve sovereign credit rating quality?

Peer reviewedPostprin

Digital Twin for Production Estimation, Scheduling and Real-Time Monitoring in Offsite Construction

The offsite construction industry continues to rely on experience-based average production rates (i.e., average quantity per unit of time) to estimate and schedule production operations. This approach is hindered by various sources of production variability, such as machine breakdowns and material shortages, often resulting in high production estimation and scheduling errors; in fact, as described herein, using average production rates may result in overly optimistic production schedules, leading to missing schedule deadlines, cost overruns, and, most critically, an overburdened workforce. In this context, this thesis proposes a digital twin to enable dynamic production estimation, scheduling, and real-time monitoring of production operations in offsite construction with more accuracy compared to the current practice. The proposed digital twin comprises three major subsystems: (1) an estimation and scheduling subsystem, which estimates variable cycle times as a function of various factors that influence them and virtually mimics operations to estimate production time and generate production schedules; (2) a computer-vision-based data acquisition subsystem that enables the continuous collection of data necessary for regular tuning of the estimation models, accommodating new sources of variability; and (3) a real-time monitoring subsystem to monitor production operations in real time, tracking progress on production schedules and enabling the generation of updated schedules promptly in response to any deviations from the actual operations. To support the development of these subsystems and their requisite functionalities, four main research objectives are pursued: (1) develop and examine a system that deploys computer-vision technology for the automated and accurate acquisition of cycle time data in a timely and cost-effective manner; (2) devise a methodical approach for the identification and understanding of the factors driving cycle time variability, and evaluate how this identification process improves the accuracy of cycle time estimation; (3) design and develop a data- and knowledge-driven system that estimates cycle times in consideration of various influencing factors and using automatically collected data to increase the estimation accuracy compared to traditional estimation methods; and (4) devise a feasible design of a digital twin that enables dynamic and more accurate production estimation, scheduling, and real-time monitoring in offsite construction factories. A diverse array of methods and technologies, including computer vision, 3D simulation, machine-learning-based prediction, statistical modelling, ultrasonic sensors, semi-structured interviews, direct observation, and literature reviews, are deployed and integrated to achieve these objectives. A prototype of the digital twin is developed for a wall framing workstation within a panelized construction factory. The results show that average errors of less than 1 minute in data acquisition, a 36% reduction in cycle time estimation errors, and an 81% reduction in deviations between the production schedule and actual production are achieved compared to the current practice of relying on experience-based average production rates

The impact of ESMA regulatory identifiers on the quality of ratings

This paper investigates the impact of the introduction of ESMA credit rating identifiers on the quality of ratings. These identifiers form part of the disclosure requirements placed upon credit rating agencies (CRAs) since 2012 under a new EU regulatory regime and have not featured in any prior empirical literature. Rating informativeness is gauged from bond market data. Using a rich dataset of sovereign rating actions by the three major CRAs for 70 countries during the period 2006–2016, we find that the ESMA requirement for identifiers yields varying outcomes across downgrades and upgrades. The rating quality associated with downgrades by Moody's improves, whereas upgrades by S&P, Moody's and Fitch are of lower quality. These results are consistent with greater conservatism in rating policies after the regulatory reforms. ESMA's additional focus on analyst location does not reveal any consistent difference in the quality of ratings