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• Teaching Note | HBS Case Collection | August 2019

  Creating Accountability in Afghanistan

  Jonas Heese, Gerardo Pérez Cavazos, Eugene F. Soltes and Grace Liu

  Teaching Note for HBS No. 120-024.

  Citation:

  Heese, Jonas, Gerardo Pérez Cavazos, Eugene F. Soltes, and Grace Liu. "Creating Accountability in Afghanistan." Harvard Business School Teaching Note 120-030, August 2019.  View Details

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• Case | HBS Case Collection | August 2019

  Creating Accountability in Afghanistan

  Jonas Heese, Gerardo Pérez Cavazos, Eugene F. Soltes and Grace Liu

  By early 2019, the United States had contributed $132 billion to the Afghan reconstruction—an amount exceeding the inflation-adjusted cost of the Marshall Plan, which aided reconstruction in 16 European countries after the Second World War. John Sopko, in his role as the Special Inspector General for Afghan Reconstruction (SIGAR), was in charge of providing accountability for U.S. aid funding. Sopko’s oversight faced severe limitations such as a growing on-budget assistance; pervasive corruption; and lack of transportation, infrastructure, and security for his staff. To fight those odds, SIGAR has implemented multiple strategies with relative success. For example, cultivating a network of sources and informants had allowed SIGAR to save the U.S. over $200 million from a fuel contract bid-rigging scheme. The SIGAR Fraud Hotline had received and reviewed over 3,200 reports. However, with the Afghan presidential elections and peace talks looming on the horizon, Sopko was wondering how SIGAR would have to adapt to a new reality that could potentially be much worse.

  Keywords: auditing; fraud; accountability; Crime and Corruption; Law Enforcement; Governance; Infrastructure; Information; Networks; Strategy; Afghanistan;

  Citation:

  Heese, Jonas, Gerardo Pérez Cavazos, Eugene F. Soltes, and Grace Liu. "Creating Accountability in Afghanistan." Harvard Business School Case 120-024, August 2019.  View Details

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• Article | Journal of Accounting Research | June 2019

  Consequences of Debt Forgiveness: Strategic Default Contagion and Lender Learning

  Gerardo Pérez Cavazos

  I use a unique data set of loans to small business owners to examine whether lenders face adverse consequences when they grant debt forgiveness to borrowers. I provide evidence consistent with borrowers communicating their debt forgiveness to other borrowers, who then more often strategically default on their own obligations. This strategic default contagion is economically large. When the lender doubles debt forgiveness, the default rate increases by 10.9% on average. Using an exogenous shock to the lender's forgiveness policy, my findings suggest that as the lender learns about the extent of borrower communication, the lender tightens its debt forgiveness policy to mitigate default contagion.

  Keywords: Debt Forgiveness; strategic default contagion; contracting; Borrowing and Debt; Communication; Learning;

  Citation:

  Pérez Cavazos, Gerardo. "Consequences of Debt Forgiveness: Strategic Default Contagion and Lender Learning." Journal of Accounting Research 57, no. 3 (June 2019): 797–841.  View Details

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