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Quis custodiet quem? Sovereign Debt and Bondholders` Protection Before 1914

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  • Rui Pedro Esteves

Abstract

The half-century before World War I has been characterized as the first age of financial globalization. This paper focuses on the role and significance of the bondholders` organizations for the governance of this market. I argue that the outcome of these institutions depended on two dimensions: the institutional variation that characterized these organizations and their strategic interaction. These aspects are addressed using a model of sovereign debt with constant renegotiation. An original data set with information on the settlement of defaulted debts in the period 1870-1913 is used to test the implications of the model. Empirical results support the premise that the quality of bondholders` representation matters for the terms of settlement and the costs of renegotiation. Renegotiation-friendly but not debtor-friendly organizations yielded the best ex post results for their members. The representation of bondholders` interests by the issue banks on the other hand, produced inferior outcomes.

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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 323.

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Date of creation: 01 Apr 2007
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Handle: RePEc:oxf:wpaper:323

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Keywords: Sovereign defaults; Bondholders` organizations; Pre-1913;

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References

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Citations

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Cited by:
  1. Cruces, Juan J. & Trebesch, Christoph, 2013. "Sovereign defaults: The price of haircuts," Munich Reprints in Economics 20036, University of Munich, Department of Economics.
  2. Rohan Pitchford & Mark L. J. Wright, 2012. "Holdouts in Sovereign Debt Restructuring: A Theory of Negotiation in a Weak Contractual Environment," Review of Economic Studies, Oxford University Press, vol. 79(2), pages 812-837.
  3. Miller, Marcus & Thomas, Dania, 2006. "Sovereign Debt Restructuring: the Judge, the Vultures and Creditor Rights," CEPR Discussion Papers 5710, C.E.P.R. Discussion Papers.
  4. Ali Coskun Tuncer, 2009. "„What did guide investors decisions” during the classical gold standard era? The case of Ottoman Empire, 1880-1914," SEEMHN papers 2, National Bank of Serbia.
  5. Drelichman, Mauricio & Voth, Hans-Joachim, 2009. "Lending to the Borrower from Hell: Debt and Default in the Age of Philip II, 1556-1598," CEPR Discussion Papers 7276, C.E.P.R. Discussion Papers.
  6. Juan J. Cruces & Christoph Trebesch, 2013. "Sovereign Defaults: The Price of Haircuts," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(3), pages 85-117, July.
  7. Flandreau, Marc & Flores Zendejas, Juan Huitzilihuitl, 2010. "Hamlet without the Prince of Denmark: Relationship banking and conditionality lending in the London market for government debt, 1815-1913," CEPR Discussion Papers 7915, C.E.P.R. Discussion Papers.
  8. Kim Oosterlinck & Loredana Ureche-Rangau & Jacques-Marie Vaslin, 2013. "Waterloo: a Godsend for French Public Finances?," Working Papers CEB 13-028, ULB -- Universite Libre de Bruxelles.
  9. Drelichman, Mauricio & Voth, Hans-Joachim, 2008. "Lending to the Borrower from Hell: Debt and Default in the Age of Phillip II," Economics working papers mauricio_drelichman-2008-, Vancouver School of Economics, revised 06 Sep 2010.
  10. Stephen Quinn, 2008. "Securitization of Sovereign Debt: Corporations as a Sovereign Debt Restructuring Mechanism in Britain, 1694-1750," Working Papers 200701, Texas Christian University, Department of Economics.
  11. Dragana Gnjatović, 2009. "Foreign long term government loans of Serbia 1862-1914," SEEMHN papers 11, National Bank of Serbia.
  12. Kim Oosterlinck, 2013. "Sovereign debt defaults: insights from history," Oxford Review of Economic Policy, Oxford University Press, vol. 29(4), pages 697-714, WINTER.
  13. 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.
  14. 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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