Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/246933 
Year of Publication: 
2011
Series/Report no.: 
EHES Working Papers in Economic History No. 2
Publisher: 
European Historical Economics Society (EHES), s.l.
Abstract: 
This paper offers a theory of conditionality lending in 19th-century international capital markets. We argue that ownership of reputation signals by prestigious banks rendered them able and willing to monitor government borrowing. Monitoring was a source of rent, and it led bankers to support countries facing liquidity crises in a manner similar to modern descriptions of "relationship" lending to corporate clients by "parent" banks. Prestigious bankers' ability to implement conditionality loans and monitor countries' financial policies also enabled them to deal with solvency. We find that, compared with prestigious bankers, bondholders' committees had neither the tools nor the prestige required for effectively dealing with defaulters. Hence such committees were far less important than previous research has claimed.
Subjects: 
Bondholders
Investment banks
certification
JEL: 
N20
F34
Document Type: 
Working Paper

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