Foreign Credit Research Articles

Debt, dignity, and defiance: why Greece went to the brink

Early in 2015, the new Greek government, led by the left-wing SYRIZA party, refused to complete the second bailout program and insisted on further debt relief. This defiant stance entails a puzzle for rational-choice explanations that focus on expected economic utility: when SYRIZA came to power, the Greek economy had resumed modest growth, while its foreign creditors had extended debt maturities and hinted at the possibility of more debt restructuring in the future. Hence, there seemed no immediate need to force the issue. Furthermore, it appeared very likely that the incoming administration's demands would be rejected by some of the creditors, each of whom wielded effective veto power. In fact, weeks before the final showdown, George Tsebelis, a leading expert in the field of EU governance, had correctly predicted that Athens was set for a dramatic climb-down. This article argues that the Greek government's bargaining tactics were neither a rational answer to the country's economic predicament nor a necessary response to domestic constraints. Instead, moral emotions and status sentiments played a decisive role. The administration's overconfident defiance was strongly influenced by anger at Greece's alleged humiliation at the hand of its creditors.

Strategy for Business Development of Agribank Thanh Hoa to 2020

“Strategy is the red thread through the activities of an organization - An Ssofg, 1965’; strategy is extremely important role in the operation of every organization, every enterprise: strategy contributed to help a business organization become more active in anticipating the changes of environment from which they can control their activities. In the current economic market, a good strategy helps increasing the competitiveness of businesses, ensuring a strong dominance of enterprise. [1] In the trend of integration and competition, the same with other companies are operating in Vietnam, Thanh Hoa Agribank has many opportunities for growth while facing new business environment more complex and risky. Competitive pressures increased when domestic banks are constantly expanding the scope of operation, growing both in quantity and quality, many foreign credit organizations are willing to participate in the Vietnam market will create a new competitive pressures increasingly strident. In this context, the question for each bank is planning a suitable business strategy to stand firmly in the market and continue to grow. For these above reasons, I decised to choose the paper Strategy for business development of Agribank Thanh Hoa to 2020 for reseach.

Self-Fulfilling Debt Dilution: Maturity and Multiplicity in Debt Models

We establish that creditor beliefs regarding future borrowing can be self-fulfilling, leading to multiple equilibria with markedly different debt accumulation patterns. We characterize such indeterminacy in the Eaton-Gersovitz sovereign debt model augmented with long maturity bonds. Two necessary conditions for the multiplicity are (i) the government is more impatient than foreign creditors, and (ii) there are deadweight losses from default. The multiplicity is dynamic and stems from the self-fulfilling beliefs of how future creditors will price bonds; long maturity bonds are therefore a crucial component of the multiplicity. We introduce a third party with deep pockets to discuss the policy implications of this source of multiplicity and identify the potentially perverse consequences of traditional “lender of last resort” policies. (JEL E44, E62, F34, H63, G12)

FAKTOR-FAKTOR PELUANG PADA PERUSAHAAN PERUSAHAAN YANG TERKENA DAMPAK KRISIS GLOBAL

This research examines what factors that can increase a company’s survival probability. Thirty financial distress companies in the years 1997-2005 with insolvency type were observed. At the end of 2005, as much as 53,33% companies could survive as an independent company. The data were examined relying on logistic regression. The covariates are operating performance, president director turnover, company’s age, and creditor equity stake. The dependent variable is the company status. Survival is positively affected by its operating performance. The only other factor systematically increasing company’s survival probability is the willingness of creditors to take an equity stake in the companies. Almost of all creditor equity stake in financially-distressed companies was executed by foreign creditor. President director turnover when the distress and company’s age did not increasing company’s survival. Keywords: survival probability, financial distress, and creditor equity stake

The effects of sovereign credit rating spillovers on neighbouring countries’ financial markets

ABSTRACTThis study investigates the spillover effects of long-term foreign currency sovereign credit rating announcements on foreign currency-denominated bonds and stock markets in 19 African countries during the period of 1994–2014. Using a combination of Granger causality tests and impulse response function, the results show that there is marginal regional sovereign rating spillover impacts that are quickly absorbed into capital markets trading long-term securities. The analysis further shows marginal spillover effects that persist over longer time periods in sovereign ratings of other countries in the same region from a sovereign rating change in one country. These results imply that the regional bilateral linkages between countries serve as channels of capital and sovereign credit rating information flow. Thus, it is imperative for regional countries to pursue prudent developmental macroeconomic policies to avoid negative ratings that will have regional spillover effects.

Hedger of Last Resort: Evidence from Brazilian FX Interventions, Local Credit, and Global Financial Cycles

We analyze whether the global financial cycle (GFC) affects local credit supply and the real effects, and whether local unconventional policies can attenuate such spillovers. For identification, we exploit GFC shocks, differential bank reliance on global funding, local central bank interventions in FX derivatives, and three matched administrative registers in Brazil: the register of foreign credit flows to domestic banks, the credit register, and the matched employer-employee register. We show that after the announcement of US Quantitative Easing tapering by Bernanke in May 2013, which is associated with massive FX depreciation and increased volatility, domestic banks with larger foreign liabilities reduce the supply of credit to firms, in turn reducing employment. However, these negative effects are attenuated after the Central Bank of Brazil announces a large intervention in the FX derivatives market, which consists in supplying insurance against FX risks â?? hedger of last resort. In addition to these two subsequent shocks, we also analyze a panel over 2008-2015. Banks with larger foreign liabilities cut credit supply after US Dollar appreciation or after an increase of FX volatility (even for US FX changes with EMs excluding Brazil). Moreover, the FX effects on credit supply and real effects are mitigated after the FX intervention of the central bank, thereby confirming that the policy of hedger of last resort has been effective in decreasing local economy spillovers to global financial conditions. Our results have important implications for international macro-finance models and policy.

Fiscal Multipliers and Foreign Holdings of Public Debt

This paper explores a natural connection between fiscal multipliers and foreign holdings of public debt. Although fiscal expansions can raise domestic economic activity through various channels, they can also have crowding-out effects if the resources used to acquire public debt reduce domestic consumption and investment. These crowding-out effects are likely to be weaker when governments have access to foreign markets to place their debt, increasing the size of multipliers. We test this hypothesis on (i) post-war US data and (ii) data for a panel of 17 advanced economies from the 1980's to the present. To do so, we assemble a novel database of public debt holdings by domestic and foreign creditors for a large set of advanced economies. We combine this data with standard measures of fiscal policy shocks and show that, indeed, the size of fiscal multipliers is increasing in the share of public debt held by foreigners. In particular, the fiscal multiplier is smaller than one when the foreign share is low, such as in the U.S. in the 1950's and 1960's and Japan today, and larger than one when the foreign share is high, such as in the U.S. and Ireland today.

Capital Inflows, Sovereign Debt and Bank Lending: Micro-Evidence from an Emerging Market

This paper uses a natural experiment to show that government access to foreign credit increases private access to credit. I identify a sudden, and unanticipated increase in capital inflows to the sovereign debt market in Colombia, due to a rebalancing in a government bond index by J.P. Morgan. I find that market makers banks in the treasury market reduced their sovereign debt by 7.8 percentage points of assets and increased their credit availability by 4.2 percentage points of assets. Using industry level data, I show that a higher exposure to market makers led to a higher growth in economic activity. Received August 17, 2017; editorial decision January 25, 2018 by Editor Philip Strahan. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Re-imagining the Indian state: External forces and the transformation of telecommunications policy, 1947–present

This article examines Indian telecom policy from independence to the present. Dividing this period into three phases – from 1947 to 1984, 1984 to 1991 and 1991 to the present – the article explores the role of the state in India’s dramatic transformation from a telecommunications laggard to one of the world’s largest markets in mobile communication. It draws on a wide range of government documents, institutional surveys (domestic and international) of Indian telephony, memoirs and analyses by policy officials, and interviews with telecom executives. This article makes two arguments. First, it emphasizes the importance of external forces, including economic pressures, obligations to foreign creditors and the arrival of outsiders into key policymaking positions. Second, it provides an alternative to the simplistic argument that the state has ‘left telecommunications to the private sector’. Rather than abandon its role in network building and maintenance, the Indian government has deployed its power in specific and deliberate ways. While much of this policy development was unanticipated and at times accidental, Indian telephony has been transformed from an inward-looking and defensive statist monopoly to an internationalized, technocratic marketplace.

History Remembered: Optimal Sovereign Default on Domestic and External Debt

Infrequent but turbulent overt sovereign defaults on domestic creditors are a forgotten history in macroeconomics. We propose a heterogeneous-agents model in which the government chooses optimal debt and default on domestic and foreign creditors by balancing distributional incentives versus the social value of debt for self-insurance, liquidity, and risk-sharing. A rich feedback mechanism links debt issuance, the distribution of debt holdings, the default decision, and risk premia. Calibrated to Eurozone data, the model is consistent with key long-run and debt-crisis statistics. Defaults are rare (1.2 percent frequency) and preceded by surging debt and spreads. Debt sells at the risk-free price most of the time, but the government's lack of commitment reduces sustainable debt sharply.

Sovereign Defaults in Court

For centuries, defaulting governments were immune from legal action by foreign creditors. This paper shows that this is no longer the case. Building a dataset covering four decades, we find that creditor lawsuits have become an increasingly common feature of sovereign debt markets. The legal developments have strengthened the hands of creditors and raised the cost of default for debtors. We show that legal disputes in the US and the UK disrupt government access to international capital markets, as foreign courts can impose a financial embargo on sovereigns. The findings are consistent with theoretical models with creditor sanctions and suggest that sovereign debt is becoming more enforceable. We discuss how the threat of litigation affects debt management, government willingness to pay, and the resolution of debt crises.

From Crisis to Crisis

The article explores the elements that led Slovenia to face another major crisis within the Eurozone turmoil less than twenty years after its political separation from Yugoslavia. The analysis builds on a combined theoretical framework of the insights from dependency school and regulation theory. The outbreak of the 1980s Yugoslav crisis and the IMF’s involvement into the domestic policy-making revealed that Slovenian post-war industrialization was dependent on imports and foreign credits. The Washington Consensus structural adjustments eased a shift in the post-war development pattern and deepened dependent integration in the European structures. During the 1990s, a labour-inclusive accumulation regime stabilized the pattern of export-led industrialization, a smaller reliance on FDI and a state-managerial control of domestic production. After 2000, however, the availability of cheap credits on the European markets, an accelerated transfer of state polices on the European level and the weakening of labour bargaining power created conditions for a dependent financialization of the Slovenian economy.

Hilferdingʼs Economic Policy and the 1927 Agrarian Program

Abstract: In the late 1920s, R. Hilferding （1877―1941）, an intellectual leader of the German Social Democratic Party and prominent exponent of organised capitalism, played an important role in economic policy, especially for agrarian problems. However, his activities have not been completely explored from a historical point of view. In several international conferences in 1926, he argued against aggressive protectionism in favour of mutually beneficial trade agreements and economic regulation under the League of Nations. Then, during parliamenta-ry discussions, he opposed the general rise of agrarian customs, and insisted on promoting high-grade, intensified production by means of differentiated tariffs and financial aids. As for international cartels, he led the 1927 inter-parliamentary commercial conference to accepting his anti-monopolistic resolution. Within the party, Hilferding, as commission chairperson, drafted an agrarian program based on his own earlier ideas as well as on the Austrian program, and successfully persuad-ed the party congress to adopt it in 1927. This program included measures for land reform, productivity improvement, and social policy, among others, intending to cooperate with the rural working populace anew. As the financial situation worsened late in 1927 and the year after, he urged the tempo-rary introduction of foreign credits in order to maintain business prosperity. He criticised the budget for mass taxation and military expenditure, highlighting the structural defects of the fiscal transfer system, and tried to restore the balance through administrative reorganisation. Nonetheless, he supported the emergency assistance project for agriculture, and demanded individually granted loans as well as the control of commerce and even of production for sta-bilisation. Overall, his economic policy aimed to make progresses in international cooperative relationships, avoiding block economy, and cope with agrarian and financial difficulties through productivity measures, basically grounded on his peculiar view of organised econo-my. JEL classification numbers: B 24, B 31, P 16.

A Study on the Privacy Policy Comparison by Domestic and Foreign Credit Card Companies' Sites

A Study on the Privacy Policy Comparison by Domestic and Foreign Credit Card Companies' Sites

Iceland's Capital Controls and the Resolution of its Problematic Bank Legacy

Iceland’s capital controls were imposed in October 2008 in order to prevent massive capital flight and a complete collapse of the exchange rate. The controls were in place for more than eight years, primarily because of the risk of large outflows of domestic holdings of the failed Icelandic banks. As argued in a precursor to this paper (Baldursson and Portes, 2014), significant restructuring of domestic holdings of foreign creditors of the banks was required before the controls could be lifted. Such a restructuring was finally accomplished in January 2016. Broadly in line with the recommendations of Baldursson and Portes (2014), the resolution involved a voluntary – in much the same sense as the Greek debt restructuring was voluntary – restructuring of the banks’ debt, under which most of the Icelandic krona assets of the banks were relinquished to the state or tied up in Iceland. An attempt at resolving so-called ‘offshore kronas’ – the remains of the carry trade into Iceland in the years before the 2008 crisis – failed resulting in a dispute with international investors. We model the strategic interaction between Iceland and creditors on the resolution of the failed banks as well as the interaction between Iceland and investors on the resolution of the offshore krona holdings. The model explains why the bank resolution was successful and why the offshore krona auction was not. Resolution of the old banks will cut Iceland’s public debt, but it will still be substantially higher than before the crisis. The net international investment position of Iceland has, however, turned positive and is stronger than it has been in decades. In March 2017, the capital controls were removed in practice, albeit not by statute. Inflow measures remain.

Some Aspects of South African Cross-Border Insolvency Relief: The Lehane Matter

The Lehane matter wound its way through the Cape Provincial Division of the High Court and reached the Supreme Court of Appeal. Mr Dunne, the debtor, lived in the United States of America and ran an international web of companies. One of these companies, Lagoon Beach Hotel, operated a Cape Town hotel. Mr Dunne later filed for chapter 7 bankruptcy in the United States and soon was also bankrupted by the Irish High Court. The Irish official trustee, Lehane, applied to the Cape court for the recognition of his status as a foreign trustee and for an anti-dissipation order preventing the disposal of South African property to which Mr Dunne was connected. Lehane succeeded at every stage of the South African proceedings.
 Initially, Steyn J recognised Lehane as the trustee as though a sequestration order had been granted against Mr Dunne in terms of the Insolvency Act 1936, thus diverging from the approach taken by the Judicial Committee of the Privy Council in Singularis Holdings Ltd v PricewaterhouseCoopers (Bermuda). Subsequently, Yekiso J's approach to applying the Insolvency Act without derogating from its generality opens up the possibility of applying section 21 of the Insolvency Act to significant effect against Mrs Dunne's South African property. Yet the territorialist restriction in Yekiso J's order that only creditors with causes of action which arose in South Africa were entitled to claim against the insolvent estate excluded many foreign creditors, even those from Ireland.
 Of the many issues raised by the Lagoon Beach Hotel company, two that are chosen for discussion in this case note are the possible application of the automatic stay under section 362 of the United States Bankruptcy Code 1978 to the South African proceedings, and the standing of Lehane because of the litigants' dispute whether Mr Dunne was domiciled in the United States or Ireland.
 Yekiso J and subsequently Leach JA held that the American automatic stay did not govern the South African proceedings. Significantly, the American and the Irish trustees were co-operating with respect to proceedings in Ireland and South Africa that involved Mr Dunne. And Leach JA deftly deferred to the Irish court the decision regarding the application of the American automatic stay and its relevance to the Irish proceedings.
 As for the disputed domicile of Mr Dunne, Yekiso J and Leach JA both considered that Mr Dunne had retained his Irish domicile. The established principles of recognising a foreign domiciliary trustee before he might deal with South African property, whether movable or immovable, were confirmed. Leach JA, however, went on to discuss the assistance that might cautiously be accorded to Lehane if Mr Dunne were domiciled elsewhere than in Ireland. Even then, the relevance of domicile could not be gainsaid.
 In the comments, it is pointed out that trustees appointed in countries other than the insolvent's domicile may still be recognised by South African courts. The insolvent's submitting to the jurisdiction of a court that is not the court of his domicile is discussed; on its facts, the cited authority does not bear out the relevant principle. And the possibility of recognising non-domiciliary trustees in exceptional circumstances and for exceptional convenience is explored. The cases cited in support of this principle are shown to yield differing results.

이익의 질과 국내외 신용등급 차이

이익의 질과 국내외 신용등급 차이

Domestic Creditor Rights and External Private Debt

This article unbundles institutions protecting domestic and foreign creditors' rights. We estimate a negative relation between the degree of domestic rights protection and the external stock of private non-guaranteed debt in 85 developing countries. A supply-side explanation is that strong domestic protection supports reliable outside financing options for potential external debt defaulters; foreign investors anticipating this would tighten credit constraints ex ante. Then we formalise the argument in a private borrowing and default model, and show that centralisation is no longer necessarily welfare superior.

Greek Bailouts: Debunking the 'Foreign Banks' Myth

If there is one indelibly recurring myth surrounding the infamous bailout loans received by Greece for the last seven years it's that the money went overwhelmingly to foreign bankers (who owned allegedly massive Greek government bond portfolios). This ever so popular argument attempts to fan the flames of social discontent by complaining that it was powerful politically-connected big international financiers, and not average vulnerable Greeks, who directly and truly benefited from the rescue programs. In that sense, the gargantuan emergency lending put together by the Eurozone and the IMF would have been a de facto transfer of global taxpayer money to the largest international banks. Foreign speculators got the cash while Greece was left to starve in a sea of untold austerity, would go the story. There is only one problem with this tale: it's not true. Hard cold data, even when suffering from the perils of estimation, dictates that in fact the least amount of bailout money would have gone to private foreign creditors. Much more money went to the Greeks and to the Eurozone-IMF themselves. The truth of the matter is that the bailouts have overwhelmingly been used to assist institutions, people, and the state in Greece. Foreign bankers got some (mostly, initial) value but were left nursing huge losses in the end.

THE IMPACT OF INFORMATION ASYMMETRY, MORAL HAZARD AND THE STRUCTURE OF FUNDING ON CORPORATE U.S. DOLLARS LOAN PRICING: THE EMPIRICAL STUDY IN INDONESIA THE PERIOD 1990-1997

This study aims to answer the question: "What factors that influence the price of corporate loans in Indonesia?" And "Are there some differences in loan pricing between several types of creditors?". Furthermore, this research is to develop and test the loan pricing model that was developed in America and Europe to the context or setting in Asia, especially Indonesia. Different conditions and settings of the financial system between America/Europe and Asia, especially Indonesia, causing the loan pricing model that was developed in America/Europe can not be fully implemented for Indonesia. Key issues in this study consisted of: information asymmetry, moral hazard and funding structure. The first issue, information asymmetry consists of the type of creditors, foreign and domestic ownership, public and non-public ownership. The second issue, moral hazard problem consists of variables governmental and non-government ownership, and the special relationship between creditors and debtors. The last issue, creditors’ structure of funding is proxied by the ratio of CD / ML. In addition, this study also adobt the loan pricing models that are developed in America / Europe as control variables. This study also examines the argument of Strahan (1999) whether the loan fees also reflected the condition of the loan as well as loan spreads. The OLS regression (Ordinary Least Squares) with white correction method (White heteroskedasticity correction) for heteroscedasticity problem is conducted to test the model. Various samples and sub samples are prepared to answer various research questions and hypotheses. Testing between regression coefficients are conducted to examine differences in loan pricing between different types of creditors for each variable in the model. The test results generally show that only two new variables suggested by the study, namely: ownership and structure of funding have a significant contribution to the loan pricing model. For variable type of institution consisting of investment banks and commercial banks indicate that generally there is no difference in loan pricing between the two, only in some models of these variables are not significant with signs consistent.Ownership variable show results consistent with the hypothesis and significant effect on loan prices. While the variable special relationship between creditors and debtors have no effect on loan prices, it is due to inter-group loans made by conglomerates. For the case of capital costs of the creditor shows that the variable has a positive effect on lending rates set by creditors. Testing different regression coefficients lead to the conclusion that domestic creditors succeeded in detecting an increased risk of the debtor before the economic crisis of 1997 compared with foreign creditors.