 Bond Restructuring and Moral Hazard: Are Collective Action Clauses Costly?Torbjorn Becker, Anthony Richards and Yunyong Thaicharoen No 2001/092, IMF Working Papers from International Monetary Fund Abstract: Many official groups have endorsed the wider use by emerging market borrowers of contract clauses which allow for a qualified majority of bondholders to restructure repayment terms in the event of financial distress. Some have argued that such clauses will be associated with moral hazard and increased borrowing costs. This paper addresses this question empirically using primary and secondary market yields and finds no evidence that the presence of collective action clauses increases yields for either higher- or lower-rated issuers. By implication, the perceived benefits from easier restructuring are at least as large as any costs from increased moral hazard. Keywords: WP; emerging market; low-rated borrower; bond issue; secondary market yield; Bond restructuring; collective action clauses; moral hazard; emerging markets; bond yields; contract design; yield premium; primary market yield data; bearer bond; rate issue; yield difference; bond contract; bond characteristic; Bonds; Emerging and frontier financial markets; International bonds; Global (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:imf:imfwpa:2001/092 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC. |
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