Independent thesis Advanced level (professional degree), 20 credits / 30 HE credits
This thesis aims to investigate whether corporate reputation indicators provide
explanatory value in credit ratings beyond traditional financial indicators among the
largest European banks during the period 2018-2024. Credit ratings play an important
role in financial markets by summarizing the creditworthiness of institutions and
influence both investment decisions and regulatory frameworks. However, previous
research suggests that credit ratings might not fully capture all relevant factors, such as
reputation.
The study applies a quantitative research approach using panel data for a sample of 37
large European banks rated by Fitch Ratings. The thesis conducts a fixed effects
multiple regression analysis with Ordinary Least Squares (OLS) estimates using credit
ratings as the dependent variable and reputation indicators as independent variables,
along with using credit risk indicators and size of banks as control variables. Reputation
is measured through Search Interest Volatility, measuring fluctuations in market
attention and Scandal Severity, capturing the intensity of negative events affecting
banks. The traditional financial indicators include Return on Risk-Weighted Assets
(RoRWA), Tier 1 Ratio, Expected Credit Loss (ECL) Ratio, Liquidity Coverage Ratio
(LCR) and total assets.
The results show that the selected reputation indicators do not provide statistically
significant evidence that they provide additional explanatory value for credit ratings,
after financial variables are included in the model. In contrast, financial indicators,
particularly the ECL Ratio and Tier 1 Ratio, are statistically significant which is
consistent with how credit risk is typically measured. These findings suggest that credit
ratings in the sample primarily reflect financial information rather than the chosen
reputation indicators. This is consistent with the theories used to form the hypothesis as
the Theoretical Framework of the study indicates a research gap where the importance
of corporate reputation and its potential effect on triggering financial instability might
not be reflected in the assessment of credit risk.
2026. , p. 60
Credit Ratings, Corporate Reputation, Credit Risk, Market Attention, Search Interest, Scandal Severity, Fitch Ratings, Basel Frameworks
International Business Program; Study Programme in Business Administration and Economics