Domestic Creditor Rights and External Private Debt

36 Pages Posted: 8 Jan 2016 Last revised: 27 Apr 2016

See all articles by Haichao Fan

Haichao Fan

Shanghai University of Finance and Economics - School of International Business Administration

Xiang Gao

Shanghai University of Finance and Economics - School of International Business Administration

Date Written: January 8, 2016

Abstract

This paper 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 nonguaranteed 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 formalize the argument in a private borrowing and default model, and show that centralization is no longer necessarily welfare superior.

Suggested Citation

Fan, Haichao and Gao, Xiang, Domestic Creditor Rights and External Private Debt (January 8, 2016). Available at SSRN: https://ssrn.com/abstract=2712590 or http://dx.doi.org/10.2139/ssrn.2712590

Haichao Fan

Shanghai University of Finance and Economics - School of International Business Administration ( email )

777 Guo-ding Road
Shanghai, 200433
China

Xiang Gao (Contact Author)

Shanghai University of Finance and Economics - School of International Business Administration ( email )

777 Guo-ding Road
Shanghai, 200433
China

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
57
Abstract Views
439
rank
383,837
PlumX Metrics