Paper Title
The Effects of Corporate Governance on Credit Ratings

Abstract
In the field of financial globalization, which has accelerated particularly since the 1980’s due to advancements in financial and technological sectors, the phenomenon of trust has become paramount for government. This period has witnessed rapid developments in financial markets and the diversification of financial instruments, leading to heightened credit risks for countries. Consequently, the measurement of credit risk has gained significance, emphasizing the role of credit rating activities. Due to this three main credit rating agencies gained importance which are Standard&Poors, Moody’s and Fitch. This study aims to analyze the impact of governance quality on sovereign credit ratings using ordered probit models for the period from 2007 to 2021 for 50 OECD countries. The analysis incorporates credit ratings from three major credit rating agencies which are Standard&Poors, Moody’s, Fitch and six different Worldwide Governance Indicators (WGIs) as determinants. The findings indicate that credit rating agencies remain vigilant regarding governance quality. This vigilance raises questions about the accuracy of sovereign credit ratings, given that several governance measures, particularly the WGIs, exhibit notable weaknesses. The study proposes that credit rating agencies should consider employing their internal resources to assess governance quality, thereby reducing reliance on external governance indicators. If governance indicators significantly influence the credit rates then excluding these indicators could represent a consistent and rational approach. Keywords - Credit rates, Corporate Governance, Ordered Probit Models.