The Evolution of Contractual Terms in Sovereign Bonds
Year: 2012
Type: article
Abstract: In reaction to defaults on sovereign debt contracts, issuers and creditors have strengthened the terms in sovereign debt contracts that enable creditors to enforce their debts judicially and that enable sovereigns to restructure their debts. These apparently contradictory approaches reflect attempts to solve an incomplete contracting problem in which debtors need to be forced to repay debts in good states of the world; debtors need to be granted partial relief from debt payments in bad states; debtors may attempt to exploit divisions among creditors in order to opportunistically reduce their debt burden; debtors may engage in excessively risky activities using creditors' money; and debtors and creditors may attempt to externalize costs on the taxpayers of other countries. We support this argument with a statistical study of the development of sovereign bond terms from 1960 to the present.
Source: The Journal of Legal Analysis
DOI: 10.1093/jla/las004
Authors: S. J. Choi, M. Gulati, E. A. Posner
Institution: University of Chicago
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W2155235875