PANOECONOMICUS, 2018, Vol. 65, Issue 1, pp. 95-115 Received: 11 March 2015; Accepted: 24 October 2015. UDC 336.774.3 ”1994/2014” DOI: https://doi.org/10.2298/PAN150311002S Original scientific paper Hami Saka Istanbul University, Department of Economics, Istanbul  hamisaka@gmail.com Mehmet Orhan Corresponding author International Burch University, Department of International Business, Sarajevo  mehmet.orhan@ibu.edu.ba Are Sovereign Ratings by CRAs Consistent? Summary: This study is an attempt to compare and contrast the credit ratings granted by prominent agencies, the so-called Big Three namely S&P, Moody’s and Fitch, that dominate the market. The sovereign ratings are proven to moti- vate the CDS figures of countries empirically, and low ratings are known to increase the interest paid to liabilities by these countries. We employ the histor- ical data over 1994-2014 on the sovereign ratings of 117 countries to test for whether the ratings assigned by CRAs are significantly different or not, with the help of paired t and ANOVA tests. Hypothesis test results reveal that such differences are significant for many countries and country groups, suggesting that the ratings by CRAs are not consistent with each other. This is true for BRIC, OECD, and emerging market countries. Extra ANOVA tests that we conducted support our findings. Key words: Credit rating agencies, Sovereign ratings, Rating discrepancy, Global financial crisis, Paired t-test, ANOVA. JEL: E44, F34, G01, G15, G24, H63. Sovereign credit ratings announced for countries are default probability assessments evaluated by credit rating agencies. The ratings are based on a vast range of elements including main macroeconomic indicators and political stability indices of the coun- try under focus. Since the ratings are crucial for a country’s access to international finance and the interest paid therein, these assessments are highly critical for any country. Besides, many investors consider the rating of the country before they shape their portfolio, and high-rated countries attract more globally-flowing finance. That is why the role played by the credit rating agencies (CRAs) is sometimes more im- portant than that of governments. A wide range of groups, including issuers, inves- tors and regulators use the information provided by rating agencies in their decision- making. Low-rated countries are affected as they have less capital inflow and the debt they incur is more costly in terms of the interest paid. In this regard, rating is a crucial process and the rating agencies, especially the “Big Three” - namely Standard and Poor’s (S&P), Moody’s and Fitch, conduct vital procedures to assign ratings to countries. This fact renders the responsibilities of the credit rating agencies inevita- ble. The market dominated by the Big Three is almost oligopolistic: more than 80% is captured by Moody’s and S&P while Fitch has a share of more than 13%, totaling about 93% of the business. Since the rating process is not transparent, there is ambi- guity about how countries are granted their sovereign ratings.