Bank Exposure, Capital and Secondary Market Discounts on the Developing Country Debt

28 Pages Posted: 27 Apr 2000 Last revised: 30 Apr 2021

See all articles by Sule Ozler

Sule Ozler

University of California, Los Angeles (UCLA) - Department of Economics; National Bureau of Economic Research (NBER)

Harry Huizinga

Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR)

Date Written: January 1992

Abstract

Previous empirical studies of secondary market discounts for developing countries have ignored important creditor country factors. The empirical evidence in this paper indicates that, after controlling for repayment indicators of borrower countries, bank exposure and capital are important determinants of secondary market discounts: an increase in the exposure of large banks to a particular country leads to a decrease in the secondary market discounts on the debt of that country, while an increase in the capital of large banks leads to an increase in secondary market discounts. Among the repayment indicators of developing countries, only debt ratios are found to be significant determinants of the discounts. We suggest that the impacts of exposure and capital can be explained by the presence of deposit insurance. The evidence presented on the stock market pricing of lender banks supports this view.

Suggested Citation

Ozler, Sule and Huizinga, Harry, Bank Exposure, Capital and Secondary Market Discounts on the Developing Country Debt (January 1992). NBER Working Paper No. w3961, Available at SSRN: https://ssrn.com/abstract=227373

Sule Ozler (Contact Author)

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
Bunche Hall 9361
Los Angeles, CA 90095-1477
United States
(310) 206-6031 (Phone)
(310) 825-9528 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Harry Huizinga

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2623 (Phone)
+31 13 466 3042 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
24
Abstract Views
777
PlumX Metrics