Determinants of credit default swaps implied ratings during the crisis: was sovereign risk mispriced?
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Author(s)Maria Alberta OliveiraLink to ORCID Index: https://orcid.org/0000-0003-2918-1354
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Carlos SantosLink to ORCID Index: https://orcid.org/0000-0002-5100-0794
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DOIhttp://dx.doi.org/10.21511/imfi.15(3).2018.01
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Article InfoVolume 15 2018, Issue #3, pp. 1-14
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This paper addresses the question of whether sovereign risk pricing was related to macroeconomic fundamentals, between 2007 and 2015, in a sample of OECD countries. The authors argue that the conflicting evidence in the literature is due to poor methodology options. The researchers innovate by modelling sovereign credit default swaps implied ratings as our sovereign risk proxy, instead of spreads, avoiding common pitfalls. Furthermore, the authors improve the variable selection, model specification and the econometric procedures used. A panel ordered probit model is chosen, assuring robust inference. The authors relax the parallel lines assumption, allowing for rating-varying coefficients of explanatory variables. The result is the first congruent model of sovereign risk during the years of the financial crisis and of the Euro Area crisis. Fiscal space variables, economic activity indicators, variables pertaining to external imbalances, and contagion proxies are relevant, with effects matching theory priors. The scientists clarify conundrums in the previous literature, posed by lack of significance of some macro fundamentals and by puzzling signs of some estimated coefficients. Moreover, this is the first paper to estimate not only the global risk premium, but also the impact of changing risk aversion. The authors find no support for claims of sovereign risk mispricing during the sample period. The results allow relevant policy conclusions, namely concerning the validity of different fiscal consolidation paths in financially distressed countries.
- Keywords
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JEL Classification (Paper profile tab)C23, E44, F34, G01, G12, G15
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References35
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Tables3
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Figures0
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- Table 1. Estimation results: panel ordered probit
- Table A1. Confidence Intervals for αi
- Table A2. Estimation results: panel ordered logit
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ESG-driven approach to managing insurance companies’ sustainable development
Inna Khovrak 
doi: http://dx.doi.org/10.21511/ins.11(1).2020.05
Insurance Markets and Companies Volume 11, 2020 Issue #1 pp. 42-52 Views: 1566 Downloads: 546 TO CITE АНОТАЦІЯEnvironmental, social and governance criteria (ESG) are considered to be the main factors in measuring the sustainability and ethical impact of companies. This article focuses on comparing the ability of insurance companies to use an ESG-driven approach to managing their sustainable development. The study is conducted using comparative analysis, statistical analysis, and a case study method. The study compares six ESG Ratings on four main criteria (dependent variables, independent variables, scale type, sample), that allows choosing the most appropriate rating for the analysis of insurance companies. As a result, 156 insurance companies are compared by the level of ESG risk (low ESG risk – 24 companies, medium ESG risk – 111 companies, high ESG risk – 21 companies) and by geographical affiliation (26 countries) using descriptive statistics. The assessment of effectiveness of the ESG-driven approach to managing sustainable development of insurance companies is carried out on the example of 16 companies by comparing their non-financial reporting (the sample is selected based on of the annual report for 2019-2020). The study identifies the most common guidelines for report development, as well as components of the ESG-driven approach: environmental (waste and pollution, climate change, energy efficiency), social (workforce and diversity, customer engagement, communities), governance (code and values, reporting, risk management). The study systematizes the best practices of insurance companies for applying the ESG-driven approach to manage their sustainable development and highlights the need for insurance companies to improve their reporting and disclosure practices related to the development of the ESG-driven approach.
Acknowledgment
Comments from the Editor and anonymous referees have been gratefully acknowledged.
