Sovereign bonds are notoriously hard to enforce. What little rights bondholders have can be vested either collectively or individually. It seems that investors, particularly in the US market, traditionally had a preference for the latter, which hindered financial market reform projects, such as the universal adoption of collective action clauses in 2003. This paper uses a range of theoretical approaches to discuss whether it is indeed in the bondholder’s collective interest to be allowed to individually sue and attach the debtor country’s assets following a default. Furthermore, it examines the landmark case of Elliott Associates v. Peru to attempt a quantitative assessment of just how much sovereign bondholders actually value individual enforcement rights. I find that even the single most important event to reinforce creditor rights in recent years had no noticeable impact on bond prices.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
11518.
Find related papers by JEL classification: F34 - International Economics - - International Finance - - - International Lending and Debt Problems K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
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