Leads and Lags in African Sovereign Credit Ratings

Marinda Pretorius, Ilsé Botha

Research output: Contribution to journalArticlepeer-review


The majority of sovereign nations have a formal credit rating from more than one credit rating agency in order to bridge the potential informational gap that goes with only one formal rating. This study investigates the behavior of rating agencies to determine if the African sovereign ratings by the three major credit rating agencies are different and if their rating actions have any influence on each other. The lead–lag relationships between the agencies are investigated by making use of a method similar to the Granger causality test in an ordered probit pooled-data and individual country time-series setting. The monthly rating changes for the three agencies were used for 12 African countries from 2009 to 2018. The results show that when general rating changes are taken into account, Moody’s follows Fitch in more instances than Fitch follows Moody’s. Furthermore, when upgrade and downgrade actions are taken into account, Standard and Poor’s leads Fitch during all downgrade periods and in some periods after a rating upgrade. It is also shown that Fitch leads Moody’s during all downgrade periods and in some periods after a rating upgrade. In terms of individual country results, for 7 of the 12 countries, there is no evidence of herding or habit behavior between any of the rating pairs. Herding behavior was identified between different pairs of rating agencies for Angola, Egypt, Mozambique, South Africa, and Tunisia. Fitch exhibits habit behavior for Mozambique, whereas Standard and Poor’s shows contrarian habit behavior for that country.

Original languageEnglish
Pages (from-to)235-253
Number of pages19
JournalJournal of African Business
Issue number2
Publication statusPublished - 2021
Externally publishedYes


  • Africa
  • C23
  • followers
  • G24
  • H63
  • habit
  • herding
  • leaders
  • sovereign credit ratings

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Development


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