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Information asymmetries and conflict of interest during the Baring crisis, 1880–1890


  • Flores, Juan H.


This article examines the potential conflict of interest of underwriters in London's foreign sovereign debt markets prior to the Baring crisis of 1890. We describe the main sources of information for investors concerning Argentina, whose government debt default contributed to Baring's collapse, and compare them with those of the underwriters, particularly Baring's. We then present some empirical evidence using data on bond prices and underwriting fees that demonstrate that Baring did not exploit its information lead to the detriment of investors. Finally, we present historical evidence that shows that Baring foresaw default before markets did and consequently planned a bailout loan that could not be issued due to political instability in Buenos Aires.

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  • Flores, Juan H., 2011. "Information asymmetries and conflict of interest during the Baring crisis, 1880–1890," Financial History Review, Cambridge University Press, vol. 18(02), pages 191-215, August.
  • Handle: RePEc:cup:fihrev:v:18:y:2011:i:02:p:191-215_00

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    References listed on IDEAS

    1. Orphanides, Athanasios, 2004. "Monetary policy in deflation: the liquidity trap in history and practice," The North American Journal of Economics and Finance, Elsevier, vol. 15(1), pages 101-124, March.
    2. Gauti B. Eggertsson, 2008. "Great Expectations and the End of the Depression," American Economic Review, American Economic Association, vol. 98(4), pages 1476-1516, September.
    3. Gauti B. Eggertsson & Benjamin Pugsley, 2006. "The Mistake of 1937: A General Equilibrium Analysis," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 24(S1), pages 151-190, December.
    4. Romer, Christina D., 1992. "What Ended the Great Depression?," The Journal of Economic History, Cambridge University Press, vol. 52(04), pages 757-784, December.
    5. Harold L. Cole & Lee E. Ohanian, 2004. "New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 779-816, August.
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    Cited by:

    1. Yann Decorzant & Juan Flores, 2012. "Public borrowing in harsh times: The Leagues of Nations loans revisited," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva 12091, Institut d'Economie et Econométrie, Université de Genève.

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