Sovereign Debt Default: The Impact of Creditor Composition
نویسنده
چکیده
The main motivation of this paper is to study the impact of the composition of creditors on the probability of default and the corresponding default risk premium on sovereign bonds, when there is debtor moral hazard. In the absence of any legal enforcement, relational contracts work only when there are creditors who have a repeated relationship with the borrower. We show that ownership structures with a larger fraction of long term lenders are associated with a lower default probability and lower risk premia, except when the country is faced with very productive investment opportunities. JEL: F34, G34, H63, D82, D86
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