In an environment characterized by weak contractual enforcement, sovereign lenders can enhance the likelihood of repayment by making their claims more difficult to restructure ex post. We show, however, that competition for repayment between lenders may result in a sovereign debt that is excessively difficult to restructure in equilibrium. This inefficiency may be alleviated by a suitably designed bankruptcy regime that facilitates debt restructuring.
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License
Patrick Bolton & Olivier Jeanne,
Structuring and Restructuring Sovereign Debt: The Role of Seniority,
J. Pol. Econ.
Available at: https://scholarship.law.columbia.edu/contract_economic_organization/1
© 2007 by The University of Chicago.