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  • Capital Markets Law Journal

Market Reactions to Sovereign Litigation

By: Faisal Z. Ahmed and Laura Alfaro
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Abstract

Recent rulings in the ongoing litigation over the pari passu clause in Argentinian sovereign debt instruments have generated considerable controversy. Some official-sector participants and academic articles have suggested that the rulings will disrupt or impede future sovereign debt restructurings by encouraging holdout creditors to litigate for full payment instead of participating in negotiated exchange offers. This paper critically examines this claim by evaluating market reactions to litigation using an event study methodology. We analyze the effect on sovereign bonds from litigation events, with particular emphasis on Argentina for the period, 1993-2014. We find evidence that the market reacts differently to Argentina than in other countries.

Keywords

Sovereign Debt; Litigation; Vulture Funds; Argentina; Sovereign Finance; Lawsuits and Litigation; Markets; Argentina

Citation

Ahmed, Faisal Z., and Laura Alfaro. "Market Reactions to Sovereign Litigation." Capital Markets Law Journal 12, no. 2 (April 2017): 141–163.
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About The Author

Laura Alfaro

General Management
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  • Health Externalities and Policy: The Role of Social Preferences By: Laura Alfaro, Ester Faia, Nora Lamersdorf and Farzad Saidi
  • FIELD Immersion 2022: Lawrence, Massachusetts By: Laura Alfaro and Tom Quinn
  • Distributional Consequences of Monetary Policy Across Races: Evidence from the U.S. Credit Register By: Laura Alfaro, Ester Faia and Camelia Minoiu
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