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|Titolo:||Loans versus bonds: the importance of potential liquidity problems of sovereign borrowers.|
|Data di pubblicazione:||2011|
|Autori interni:||HALLAK, ISSAM|
|Autori:||Issam Hallak; Paul Schure|
|Titolo del libro:||Sovereign Debt: From Safety to Default|
|Tutti i curatori:||Robert W. Kolb|
|Abstract:||Do sovereign borrowers care whether they attract funds through the sovereign loan market or the sovereign bond market? Research on the corporate debt market suggests that loans and bonds are fundamentally different. Loans are usually associated with a limited number of credit relationships while bond holdings tend to be more dispersed. Differences in the number of credit relationships implies that the incentives to screen and monitor borrowers are generally different for lenders and investors in bonds. Furthermore, banks, as important institutions on the supply side of the loan market, are special. Diamond and Rajan (2001) explain that their dependence on deposit financing can make banks superior monitors and Coleman et al. (2006) provides supporting evidence. In this chapter we discuss a second reason why loans and bonds are different: lenders and bond holders may differ in their treatment of illiquid borrowers . In case illiquidity strikes lenders may allow for relatively efficient renegotiation, while dispersed bondholders may face severe coordination problems which can lead to substantial delay, or failure of loan renegotiations. This story is consistent with the model of Bolton and Scharfstein (1995) and Morris and Shin (2004) underscore the importance of coordination costs in sovereign debt markets. Banks may prove to be special lenders also when it comes to addressing borrower illiquidity. For example, Elsas and Krahnen (1998), Boot (2000), and others show that relationship banks act as liquidity insurers in situations of liquidity problems of borrowers.|
|Appare nelle tipologie:||20 - Contributo in volume Capitolo o Saggio Scientifico|
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