Optimal Collective Action Clause Thresholds
Abstract/Contents
- Abstract
- Major financial crises in the previous decade—Mexico in 1994, East Asia in 1997, and Russia in 1998—have drawn greater attention to the importance of organized sovereign debt resolution. Collective action clauses (CACs) are stipulations in bond contracts that allow for greater certainty and flexibility in the debt restructuring process in the event of a sovereign default. By allowing restructuring to occur without a unanimous vote by all bondholders and instead requiring a specific supermajority consensus, there is greater probability that restructuring can occur and the investors compensated. Previous literature has studied the consequences of CAC inclusion on borrowing costs. In contrast, this thesis examines the ex ante utility optimizing decision making process of sovereign borrowers as they decide the voting threshold in their CACs for bondholders’ approval of a restructuring. In addition, we empirically examine issuespecific characteristics, domestic economic conditions, and global and emerging market credit conditions to determine the factors that affect a sovereign’s decision to issue with a specific voting threshold.
Description
Type of resource | text |
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Date created | May 2007 |
Creators/Contributors
Author | Seki, Jenna | |
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Primary advisor | Taylor, John B. | |
Degree granting institution | Stanford University, Department of Economics |
Subjects
Subject | Stanford Department of Economics |
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Subject | collective action clause |
Subject | majority action clause |
Subject | emerging market debt |
Subject | sovereign debt |
Subject | International Monetary Fund |
Subject | Sovereign Debt Restructuring Mechanism |
Genre | Thesis |
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Preferred citation
- Preferred Citation
- Seki, Jenna. (2007). Optimal Collective Action Clause Thresholds . Stanford Digital Repository. Available at: https://purl.stanford.edu/pq869sr9799
Collection
Stanford University, Department of Economics, Honors Theses
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