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Autoren: 
Chamon, Marcos
Schumacher, Julian
Trebesch, Christoph
Datum: 
2018
Reihe/Nr.: 
CESifo Working Paper 7137
Zusammenfassung: 
Governments often issue bonds in foreign jurisdictions, which can provide additional legal protection vis-à-vis domestic bonds. This paper studies the effect of this jurisdiction choice on bond prices. We test whether foreign-law bonds trade at a premium compared to domestic-law bonds. We use the euro area 2006-2013 as a unique testing ground, controlling for currency risk, liquidity risk, and term structure. Foreign-law bonds indeed carry significantly lower yields in distress periods, and this effect rises as the risk of a sovereign default increases. These results indicate that, in times of crisis, governments can borrow at lower rates under foreign law.
Schlagwörter: 
sovereign debt
creditor rights
seniority
law and finance
JEL: 
F34
G12
K22
Dokumentart: 
Working Paper

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