Market Reactions to Sovereign Litigation

Faisal Z. Ahmed; Laura  Alfaro

Article | Capital Markets Law Journal

Market Reactions to Sovereign Litigation

by Faisal Z. Ahmed and Laura Alfaro

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;

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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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Market Reactions to Sovereign Litigation

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