Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/183344
Authors: 
Chamon, Marcos
Schumacher, Julian
Trebesch, Christoph
Year of Publication: 
2018
Series/Report no.: 
ECB Working Paper 2162
Abstract: 
Governments often issue bonds in foreign jurisdictions, which can provide additional legal protection vis-á-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.
Subjects: 
Sovereign Debt
Creditor Rights
Seniority
Law and Finance
JEL: 
F34
G12
K22
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-3267-7
Document Type: 
Working Paper

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