Bonds and Brands : intermediaries and reputation in sovereign debt markets 1820-1830
AbstractHow does sovereign debt emerge and become sustainable? This paper provides a new answer to this unsolved puzzle. Focusing on the early 19th century, we argue that intermediaries’ market power served to overcome information asymmetries and sustained the development of sovereign debt. Relying on insights from corporate finance, we argue that capitalists turned to intermediaries’ reputations to guide their investment strategies. The outcome was a two-tier global bond market, which was sustained by hierarchical relations among intermediaries. This novel theoretical perspective is backed by new archival evidence and empirical data that have never been gathered so far.
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Bibliographic InfoPaper provided by Universidad Carlos III, Departamento de Historia Económica e Instituciones in its series Working Papers in Economic History with number wp07-12.
Date of creation: Jul 2007
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-09-24 (All new papers)
- NEP-FMK-2007-09-24 (Financial Markets)
- NEP-HIS-2007-09-24 (Business, Economic & Financial History)
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- Marc Flandreau, Juan Flores, 2010. "Hamlet Without The Prince of Denmark: Relationship Banking and Conditionality Lending In The London Market For Foreign Government Debt, 1815 - 1913," IHEID Working Papers 08-2010, Economics Section, The Graduate Institute of International Studies.
- Marc Flandreau & Juan Flores, 2011. "Bondholders vs. bond-sellers? Investment banks and conditionality lending in the London market for foreign government debt, 1815-1913," Working Papers 0002, European Historical Economics Society (EHES).
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