Using the results of credit ratings of 117 countries and territories in the period 2011-2017 provided
by the Standard and Poor’s, the aim of this study is to examine the determinants of the sovereign
debt credit ratings, especially the impact of financial system factors on the sovereign credit ratings.
By employing the random effects ordered probit regression model, the research results show that
inflation rate, central government debt, trade in services, liquid reserves of banking system
negatively affect sovereign credit ratings, whereas current account balance, corruption index, the
size of the banking system, the market capitalization of listed companies positively influence
sovereign credit ratings. Considering the effects of financial system variables on sovereign credit
ratings, several governance recommendations are given for governments and for central banks to
improve the credit ratings of countries and territories.