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

37 Pages Posted: 13 Oct 2008

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: 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, specificallycommercial 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 ofdeveloping 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

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 (2006). NYU Working Paper No. 2451/26092, Available at SSRN: https://ssrn.com/abstract=1282523

Anthony Saunders

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

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Anand Srinivasan

National University of Singapore - Department of Finance ( email )

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Singapore

Ingo Walter (Contact Author)

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

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212-995-4220 (Fax)

New York University (NYU) - Department of Finance

Stern School of Business
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New York, NY 10012-1126
United States

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