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Full-Text Articles in Securities Law
The Price Of Law: The Case Of The Eurozone's Collective Action Clauses, Elena Carletti, Paolo Colla, Mitu Gulati, Steven Ongena
The Price Of Law: The Case Of The Eurozone's Collective Action Clauses, Elena Carletti, Paolo Colla, Mitu Gulati, Steven Ongena
Faculty Scholarship
Do markets value contract protections? And does the quality of a legal system affect such valuations? To answer these questions we exploit a unique experiment whereby, after January 1, 2013, newly issued sovereign bonds of Eurozone countries under domestic law had to include Collective Action Clauses (CACs) specifying the minimum vote needed to modify payment terms. We find that CAC bonds trade at lower yields than otherwise similar no-CAC bonds; and that the quality of the legal system matters for this differential. Hence, markets appear to see CACs as providing protection against the legal risk embedded in domestic-law sovereign bonds.
Sovereign Debt And The “Contracts Matter” Hypothesis, W. Mark C. Weidemaier, Mitu Gulati
Sovereign Debt And The “Contracts Matter” Hypothesis, W. Mark C. Weidemaier, Mitu Gulati
Faculty Scholarship
The academic literature on sovereign debt largely assumes that law has little role to play. Indeed, the primary question addressed by the literature is why sovereigns repay at all given the irrelevance of legal enforcement. But if law, and specifically contract law, does not matter, how to explain the fact that sovereign loans involve detailed contracts, expensive lawyers, and frequent litigation? This Essay makes the case that contract design matters even in a world where sovereign borrowers are hard (but not impossible) to sue. We identify a number of gaps in the research that warrant further investigation.
The Relevance Of Law To Sovereign Debt, W. Mark C. Weidemaier, Mitu Gulati
The Relevance Of Law To Sovereign Debt, W. Mark C. Weidemaier, Mitu Gulati
Faculty Scholarship
The literature on sovereign debt treats law as of marginal significance, largely because the doctrine of sovereign immunity leaves creditors few potent legal remedies against sovereign borrowers. Although sovereign debts can indeed by hard to enforce, the goal of this Essay is to demonstrate that law plays a central, and constantly evolving, role in structuring sovereign debt markets. To list just a few examples, legal rules and institutions (i) decide when a borrower is sovereign, (ii) define the consequences of sovereignty by drawing (or refusing to draw) artificial boundaries between the sovereign and other legal entities, (iii) play some role …