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Contribution Details
| Type | Journal Article |
| Scope | Discipline-based scholarship |
| Title | The Price of Law: The Case of the Eurozone Collective Action Clauses |
| Organization Unit | |
| Authors |
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| Item Subtype | Original Work |
| Refereed | Yes |
| Status | Published in final form |
| Language |
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| Journal Title | Review of Financial Studies |
| Publisher | Oxford University Press |
| Geographical Reach | international |
| ISSN | 0893-9454 |
| Volume | 34 |
| Number | 12 |
| Page Range | 5933 - 5976 |
| Date | 2021 |
| Abstract Text | We analyze the price effect of the introduction of Collective Action Clauses (CACs) in newly issued sovereign bonds of Eurozone countries as of January 1, 2013. By allowing a majority of creditors to modify payment obligations, such clauses reduce the likelihood of holdouts while facilitating strategic default by the sovereign. We find that CAC bonds trade in the secondary market at lower yields than otherwise similar no-CAC bonds. The yield differential widens in countries with worse ratings and in those with stronger legal systems, especially if of mid-range quality. Hence, CACs are seen as pro- rather than anti-creditor provisions. |
| Free access at | Related URL |
| Official URL | https://academic.oup.com/rfs/article-abstract/34/12/5933/6050890?redirectedFrom=fulltext |
| Related URLs | |
| Digital Object Identifier | 10.1093/rfs/hhaa140 |
| Other Identification Number | merlin-id:20783 |
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