Citation

Discussion Paper Details

Please find the details for DP1655 in an easy to copy and paste format below:

Full Details | Bibliographic Reference

Full Details

Title: Debt Concentration and Bargaining Power: Large Banks, Small Banks, and Secondary Prices

Author(s): Raquel Fern�ndez and Sule Ozler

Publication Date: June 1997

Keyword(s): Bargaining Power, Secondary Market Prices and Sovereign Debt

Programme Area(s): International Macroeconomics

Abstract: Commercial bank debts of developing countries are held by a heterogenous group of banks. Here we focus on the distinction between large international money-centre banks and smaller domestic banks. In particular we investigate the role of debt concentration ? the amount of a country?s debt held by large banks relative to small banks ? on the secondary market price for these loans. Our empirical investigation indicates that concentration is an important determinant of secondary market discounts: higher concentration decreases the discount. An explanation for this finding is provided in the context of a bargaining model that endogenizes the level of the maximum penalty that banks can credibly threaten to impose on a recalcitrant debtor. We show that the banks? bargaining power increases with the degree of debt concentration, which in turn increases repayment and secondary market prices (and hence lowers discounts).

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1655

Bibliographic Reference

Fern�ndez, R and Ozler, S. 1997. 'Debt Concentration and Bargaining Power: Large Banks, Small Banks, and Secondary Prices'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1655