Although credit rating agencies have gradually moved away from a policy of never rating a corporation above the sovereign (the `sovereign ceiling`), it appears that sovereign credit ratings remain a significant determinant of corporate credit ratings. We examine this link using data for advanced and emerging economies over the period of 1995-2009. Our main result
Using a new data set on corporate bonds placed in international markets by advanced and emerging market borrowers, this paper demonstrates that the impact of debt market illiquidity on corporate bond spreads is exacerbated with a higher proportion of short-term debt. This effect is stronger in speculative-grade bonds and is smaller in the banking sector