Innovation in International Law and Global Finance: Estimating the Financial Impact of the Cape Town Convention

37 Pages Posted: 11 Sep 2006

See all articles by Anthony Saunders

Anthony Saunders

New York University - Leonard N. Stern School of Business

Anand Srinivasan

National University of Singapore - Department of Finance

Ingo Walter

New York University - Leonard N. Stern School of Business; New York University (NYU) - Department of Finance

Multiple version iconThere are 4 versions of this paper

Date Written: March 29, 2006

Abstract

This paper examines the financial impact of a transfer of legal sovereignty covering the rights to collateral to an international regime in the case of the Cape Town Convention and Protocol covering international mobile assets, specifically commercial aircraft and related equipment, which came into force in 2004. We estimate the impact on financing costs facing airlines based in signatory countries in terms of access to financial markets and interest differentials, debt rating migration and stock prices using rating-sensitivity analysis, OLS regressions and event studies. We find that the present value of the resulting financing cost reductions are very significant and are biased in favor of developing countries, the sources of much of the growth in demand for commercial aircraft going forward. The results suggest the power of changes in the legal framework of financial markets to influence the costs and pricing of global financial flows.

Keywords: Law and finance, secured lending, aircraft finance, leasing, sovereign risk, asset securitization

JEL Classification: K11, K33, F34, G15, G28, G33

Suggested Citation

Saunders, Anthony and Srinivasan, Anand and Walter, Ingo, Innovation in International Law and Global Finance: Estimating the Financial Impact of the Cape Town Convention (March 29, 2006). Available at SSRN: https://ssrn.com/abstract=894027 or http://dx.doi.org/10.2139/ssrn.894027

Anthony Saunders

New York University - Leonard N. Stern School of Business ( email )

44 West 4th Street
9-190, MEC
New York, NY 10012-1126
United States
212-998-0711 (Phone)
212-995-4220 (Fax)

Anand Srinivasan

National University of Singapore - Department of Finance ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

Ingo Walter (Contact Author)

New York University - Leonard N. Stern School of Business ( email )

44 West 4th Street
New York, NY 10012
United States
212-998-0707 (Phone)
212-995-4220 (Fax)

New York University (NYU) - Department of Finance

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

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