Rating Groups vs. Rating Group Members : Evidence from the Italian Financial Market

Group members benefit from the distinguished relationship with other members, particularly helpful in distressing scenarios. Therefore, group membership is able to impact significantly on the risk exposure of a firm but the evaluation of aggregate features is more complex than the individual analysis of each member, requiring the support of an information analyst able to define judgment that considers also the inter-group relationships and to access to reserved information collected directly from the group. Based on quot;criteriaquot; adopted by the rating agencies, there are no independent estimates of group ratings, with respect to the rating of the individual group entities, and, in many cases, agencies choose to not notify the market of their judgment of the group.This paper examines the relationship between ratings of groups and individual group entities, with a view to assessing the effects of change to the group structure on the rating.The analysis focuses on the financial sector and is limited to the Italian market, which has been characterized in recent years by a strong trend towards concentration. The results achieved by analysing the rating processes by the main international agencies (Fitch, Moody's and Standard and Poor's) show that the ratings of the groups, or of the individual group entities, adjusted on the basis of their characteristics, are not at all affected by the occurrence of significant corporate events regarding the group's structure