DBP - CEG Credit Ratings Study.pdf

Benchmarking Credit ratings September 2013

Project team:
Tom Hird
Annabel Wilton

CEG Asia Pacific
234 George St
Sydney NSW 2000
Australia
T [phone] www.ceg-ap.com Table of Contents
Executive summary........................................................................................ 1
1

Introduction ............................................................................................ 6

2

SNL Financial dataset .............................................................................. 8
2.1 Credit ratings ..........................................................................................................8

3

Description and interpretation of data .................................................... 11
3.1 Consistency with ERA results ............................................................................... 13

4

Regression model and diagnostics ......................................................... 14
4.1 Simple linear regression ....................................................................................... 14
4.2 Why the gas pipeline dummy is underestimated.................................................. 15
4.3 Robustness testing ................................................................................................ 19

Appendix A Alternative regression models ................................................ 29

i

List of Figures
Figure 1: Median credit ratings benchmarked by the ERA ................................................. 13
Figure 2: Illustration of role of unobservable confounding factor ..................................... 17
Figure 3: Illustration of impact on dummy variable ........................................................... 18
Figure 4: Thresholds for ordinal regression ....................................................................... 24
Figure 5: Adjusted R-square for 48 fitted models