Publication:
Does Governing Law Affect Bond Spreads?

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dc.contributor.authorDe, Supriyo
dc.contributor.authorRatha, Dilip
dc.contributor.authorKurlat, Sergio
dc.date.accessioned2016-11-01T17:08:18Z
dc.date.available2016-11-01T17:08:18Z
dc.date.issued2016-10
dc.description.abstractControlling for bond and issuer characteristics, bond spreads are expected to be equal across different legal jurisdictions, and differences are expected to disappear through arbitrage. However, an analysis of 435 U.S. dollar–denominated bonds issued by 53 emerging market sovereigns during 1990-2015 reveals that after the financial crisis of 2008, the launch spread of sovereign bonds issued under U.K. law has been higher than those issued under U.S. law, by 130 basis points for BB+ bonds and 175 basis points for B- bonds. This effect was not significant for investment grade bonds. On average, bonds issued under U.K. law had weaker ratings and shorter tenors post-crisis. The post-crisis impact of governing law on sovereign bond spreads is not explained by collective action clauses, or first-time bond issuances. Instead, the difference seems to be related to the perception that U.S. law offers stronger investor protection, and that the investor base for bonds issued under U.S. law is larger than that for bonds issued under U.K. law. The difference in spreads persists in the secondary market even after 180 days, perhaps because of the lack of liquidity, as investors tend to buy and hold these more attractive bonds on a longer term basis.en
dc.identifierhttp://documents.worldbank.org/curated/en/2016/10/26868025/governing-law-affect-bond-spreads
dc.identifier.doi10.1596/1813-9450-7863
dc.identifier.urihttps://hdl.handle.net/10986/25308
dc.languageEnglish
dc.language.isoen_US
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Paper;No. 7863
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectbond spreads
dc.subjectdevelopment finance
dc.subjectemerging markets
dc.subjectsovereign ratings
dc.subjectgoverning law
dc.subjectinvestor protection
dc.subjectliquidity
dc.titleDoes Governing Law Affect Bond Spreads?en
dc.typeWorking Paperen
dc.typeDocument de travailfr
dc.typeDocumento de trabajoes
dspace.entity.typePublication
okr.crossref.titleDoes Governing Law Affect Bond Spreads?
okr.date.disclosure2016-10-17
okr.doctypePublications & Research
okr.doctypePublications & Research::Policy Research Working Paper
okr.docurlhttp://documents.worldbank.org/curated/en/2016/10/26868025/governing-law-affect-bond-spreads
okr.guid903341476714665225
okr.identifier.doi10.1596/1813-9450-7863
okr.identifier.externaldocumentum090224b08463866e_1_0
okr.identifier.internaldocumentum26868025
okr.identifier.reportWPS7863
okr.importedtrue
okr.language.supporteden
okr.pdfurlhttp://documents.worldbank.org/curated/en/903341476714665225/pdf/WPS7863.pdfen
okr.region.countryUnited Kingdom
okr.region.countryUnited States
okr.topicFinance and Financial Sector Development::Capital Markets and Capital Flows
okr.topicFinance and Financial Sector Development::Debt Markets
okr.topicFinance and Financial Sector Development::Finance and Development
okr.topicFinance and Financial Sector Development::International Financial Markets
okr.topicLaw and Development::Financial Law
okr.unitGlobal Indicators Group, Development Economics
relation.isAuthorOfPublication979327ad-ac79-5a52-98ad-ee91fca9734d
relation.isAuthorOfPublication.latestForDiscovery979327ad-ac79-5a52-98ad-ee91fca9734d
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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