Arbeitspapier
Foreign-Law Bonds: Can They Reduce Sovereign Borrowing Costs?
Governments often issue bonds in foreign jurisdictions, which can provide additional legal protection vis-à-vis domestic bonds. This paper studies the effect of this jurisdiction choice on bond prices. We test whether foreign-law bonds trade at a premium compared to domestic-law bonds. We use the euro area 2006-2013 as a unique testing ground, controlling for currency risk, liquidity risk, and term structure. Foreign-law bonds indeed carry significantly lower yields in distress periods, and this effect rises as the risk of a sovereign default increases. These results indicate that, in times of crisis, governments can borrow at lower rates under foreign law.
- Language
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Englisch
- Bibliographic citation
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Series: CESifo Working Paper ; No. 7137
- Classification
-
Wirtschaft
International Lending and Debt Problems
Asset Pricing; Trading Volume; Bond Interest Rates
Business and Securities Law
- Subject
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sovereign debt
creditor rights
seniority
law and finance
- Event
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Geistige Schöpfung
- (who)
-
Chamon, Marcos
Schumacher, Julian
Trebesch, Christoph
- Event
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Veröffentlichung
- (who)
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Center for Economic Studies and ifo Institute (CESifo)
- (where)
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Munich
- (when)
-
2018
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Chamon, Marcos
- Schumacher, Julian
- Trebesch, Christoph
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2018
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