 An Agency Theory Approach to Sovereign Debt CrisisGuangdi Chang and Fulwood Chen The International Journal of Business and Finance Research, 2013, vol. 7, issue 5, 123-134 Abstract: Governments are expected to be a stabilizing force when the economy is in trouble, but recently they are a source of chaos. The cause behind the sovereign debt crisis is debt that far exceeds a government’s ability to repay. Why do governments of debt-ridden countries lose the sense of risk that unlimited accumulation of debt would bring their countries to the brink of insolvency? Economic factors alone can not provide a complete explanation. This paper combines agency theory with studies on public finance to develop a model to elucidate a government’s behavior in public finance. We find that too much political concern underlies irresponsible fiscal polices. Enhancing the independence of budget offices and intensifying the transparency of public finance can be prescriptions to contain the reoccurrence of sovereign debt crisis. Keywords: Budget Deficits; Deficit/GDP ratio; Sovereign Debt Crisis (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ibf:ijbfre:v:7:y:2013:i:5:p:123-134 Access Statistics for this article The International Journal of Business and Finance Research is currently edited by Terrance Jalbert More articles in The International Journal of Business and Finance Research from The Institute for Business and Finance Research |
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