Foreign-law bonds: Can they reduce sovereign borrowing costs?
Marcos Chamon (),
Julian Schumacher and
Christoph Trebesch
Journal of International Economics, 2018, vol. 114, issue C, 164-179
Abstract:
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.
Keywords: Sovereign debt; Creditor rights; Seniority; Law and finance (search for similar items in EconPapers)
JEL-codes: F34 G12 K22 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022199618301259
Full text for ScienceDirect subscribers only
Related works:
Journal Article: Foreign-Law Bonds: Can They Reduce Sovereign Borrowing Costs? (2018) 
Working Paper: Foreign-Law Bonds: Can They Reduce Sovereign Borrowing Costs? (2018) 
Working Paper: Foreign-Law Bonds: Can They Reduce Sovereign Borrowing Costs? (2018) 
Working Paper: Foreign-law bonds: can they reduce sovereign borrowing costs? (2018) 
Working Paper: Foreign-law bonds: Can they reduce sovereign borrowing costs? (2018) 
Working Paper: Foreign Law Bonds: Can They Reduce Sovereign Borrowing Costs? (2015) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:114:y:2018:i:c:p:164-179
DOI: 10.1016/j.jinteco.2018.06.004
Access Statistics for this article
Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and RodrÃguez-Clare, Andrés
More articles in Journal of International Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().