The expansion of credit rating agencies into emerging markets is examined with respect to the overall quality of informational signals provided by ratings to capital markets. Corporate ratings from six developing economies with relatively sophisticated financial sectors are modeled using ordered probit estimation techniques. The paper finds that the informational content in emergingmarket corporate credit ratings is poor ipso facto and compared to similar models of developed market ratings, and suggests that the sample countries are subject to what is termed an ‘emerging market premium’. The consequences of this hypothesis for applications in development finance and regulatory regimes are briefly considered. Procyclicality is not found to be a problem, but this is attributed to clustering rather than through-the-cycle design. It is concluded that corporate credit ratings currently do not actively enhance efficient financial intermediation in developing financial markets and are not a sufficient criterion for risk allocation in regulatory regimes.

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Keywords

Corporate Credit Rating, Ordered Probit, Financial Intermediation