Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25399
Authors: 
Year of Publication: 
2003
Series/Report no.: 
CFS Working Paper No. 2003/34
Publisher: 
Goethe University Frankfurt, Center for Financial Studies (CFS), Frankfurt a. M.
Abstract: 
While focusing on the protection of distressed sovereigns, the current debate intended to reform the International Financial Architecture has hardly addressed the protection of creditors rights that varies among laws. I suspect however that this constitutes an essential determinant of the success of suggested solutions, especially under the contractual approach. Based on a sample of bonds issued by developing countries states in the period, January 1987 to December 1997, I find that, for given contract characteristics (e.g. listing markets and currency), the governing law is selected according to its ability to enforce repayment. However, although the New York law seems looser and incur larger enforcement costs than the England&Wales law, the former permits equivalent yearly credit amounts. I interpret this as a consequence of the existence of a larger set of valuable assets (e.g. trade) in the US that constitute implicit securities. My findings yield important implications for the reforms. In particular, provided that there exists a seemingly equivalent enforcement credibility between England and New York laws, the prompt implementation of the contractual approach solution should constitute a valuable first step toward efficient sovereign debt markets.
Subjects: 
Law and Finance
Sovereign Debt Restructuring Mechanism
Collective Action Clause
Bankruptcy
Creditor Rights Protection
JEL: 
F34
G33
K33
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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