Bondholders versus bond-sellers? Investment banks and conditionality lending in the London market for foreign government debt, 1815–1913
This paper offers a theory of conditionality lending in nineteenth-century international capital markets. We argue that ownership of reputation signals by prestigious banks rendered them able and willing to monitor government borrowing. Monitoring was a source of rent, and it led bankers to support...
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Veröffentlicht in: | European review of economic history 2012-11, Vol.16 (4), p.356-383 |
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description | This paper offers a theory of conditionality lending in nineteenth-century international capital markets. We argue that ownership of reputation signals by prestigious banks rendered them able and willing to monitor government borrowing. Monitoring was a source of rent, and it led bankers to support countries facing liquidity crises in a manner similar to modern descriptions of "relationship" lending to corporate clients by "parent" banks. Prestigious bankers' ability to implement conditionality loans and monitor countries' financial policies also enabled them to deal with solvency. We find that, compared with prestigious bankers, bondholders' committees had neither the tools nor the prestige required for effectively dealing with defaulters. Hence such committees were far less important than previous research has claimed. |
doi_str_mv | 10.1093/ereh/hes005 |
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Investment banks and conditionality lending in the London market for foreign government debt, 1815–1913</title><title>European review of economic history</title><description>This paper offers a theory of conditionality lending in nineteenth-century international capital markets. We argue that ownership of reputation signals by prestigious banks rendered them able and willing to monitor government borrowing. Monitoring was a source of rent, and it led bankers to support countries facing liquidity crises in a manner similar to modern descriptions of "relationship" lending to corporate clients by "parent" banks. Prestigious bankers' ability to implement conditionality loans and monitor countries' financial policies also enabled them to deal with solvency. We find that, compared with prestigious bankers, bondholders' committees had neither the tools nor the prestige required for effectively dealing with defaulters. Hence such committees were far less important than previous research has claimed.</description><subject>19th century</subject><subject>Bank loans</subject><subject>Bankers</subject><subject>Banking crises</subject><subject>Banks</subject><subject>Borrowing</subject><subject>Capital markets</subject><subject>Collective action</subject><subject>Debt</subject><subject>Deficit financing</subject><subject>Economic history</subject><subject>Funding</subject><subject>Investors</subject><subject>Liquidity</subject><subject>Loan defaults</subject><subject>Loans</subject><subject>Market shares</subject><subject>Prestige</subject><subject>Relationship banking</subject><subject>Reputations</subject><subject>Sovereign debt</subject><subject>Stockholders</subject><subject>Underwriting</subject><issn>1361-4916</issn><issn>1474-0044</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2012</creationdate><recordtype>article</recordtype><sourceid>8G5</sourceid><sourceid>ABUWG</sourceid><sourceid>AFKRA</sourceid><sourceid>AZQEC</sourceid><sourceid>BENPR</sourceid><sourceid>CCPQU</sourceid><sourceid>DWQXO</sourceid><sourceid>GNUQQ</sourceid><sourceid>GUQSH</sourceid><sourceid>M2O</sourceid><sourceid>PQHSC</sourceid><recordid>eNqFkE1LAzEQhhdRUKsnz0JA8KJrZzYfmz2JFr-g4KX3ZT-Sduua1CQVvHn26j_0l5i64lWYzGQyDxPeN0mOEC4QCjpWTi3GC-UB-FayhyxnKQBj2_FOBaasQLGb7Hu_BEAKMttLPq6taRe2b5Xz5DWmtSd1fEq96vvYXpIH86p8eFYmkLoyT55UpiVNRLrQWVP1XXgjvYqtmZPOkLBQZBqn1pDnyj2pQLR1m6O6uSFzG_8wP8taVYdzghL51_snFkgPkh1d9V4d_tZRMru9mU3u0-nj3cPkapo2WUFDqhsuOJeV1E2d0wK05pBnBbSSsRplC4XIOGqdyapWHLLIt6KoG614K0HQUXIyrF05-7KO0sqlXbsoxJcoMIbIkUfqbKAaZ713Spcr10VBbyVCufG63HhdDl5H-nSg7Xr1D3g8gEsfrPtDGeYgcyroN1N2jAQ</recordid><startdate>201211</startdate><enddate>201211</enddate><creator>FLANDREAU, MARC</creator><creator>FLORES, JUAN H.</creator><general>Cambridge University Press</general><general>Oxford University Press</general><scope>AAYXX</scope><scope>CITATION</scope><scope>3V.</scope><scope>7WY</scope><scope>7WZ</scope><scope>7XB</scope><scope>87Z</scope><scope>8BF</scope><scope>8FK</scope><scope>8FL</scope><scope>8G5</scope><scope>ABUWG</scope><scope>AFKRA</scope><scope>AXJJW</scope><scope>AZQEC</scope><scope>BENPR</scope><scope>BEZIV</scope><scope>CCPQU</scope><scope>DWQXO</scope><scope>FREBS</scope><scope>FRNLG</scope><scope>F~G</scope><scope>GNUQQ</scope><scope>GUQSH</scope><scope>K60</scope><scope>K6~</scope><scope>L.-</scope><scope>M0C</scope><scope>M0Q</scope><scope>M2O</scope><scope>MBDVC</scope><scope>PADUT</scope><scope>PQBIZ</scope><scope>PQBZA</scope><scope>PQEST</scope><scope>PQHSC</scope><scope>PQQKQ</scope><scope>PQUKI</scope><scope>PYYUZ</scope><scope>Q9U</scope></search><sort><creationdate>201211</creationdate><title>Bondholders versus bond-sellers? Investment banks and conditionality lending in the London market for foreign government debt, 1815–1913</title><author>FLANDREAU, MARC ; FLORES, JUAN H.</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c293t-fc56558a8fcb7390ff507290d844b18d096251ff28abe502fc5d69bcfe5d8063</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2012</creationdate><topic>19th century</topic><topic>Bank loans</topic><topic>Bankers</topic><topic>Banking crises</topic><topic>Banks</topic><topic>Borrowing</topic><topic>Capital markets</topic><topic>Collective action</topic><topic>Debt</topic><topic>Deficit financing</topic><topic>Economic history</topic><topic>Funding</topic><topic>Investors</topic><topic>Liquidity</topic><topic>Loan defaults</topic><topic>Loans</topic><topic>Market shares</topic><topic>Prestige</topic><topic>Relationship banking</topic><topic>Reputations</topic><topic>Sovereign debt</topic><topic>Stockholders</topic><topic>Underwriting</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>FLANDREAU, MARC</creatorcontrib><creatorcontrib>FLORES, JUAN H.</creatorcontrib><collection>CrossRef</collection><collection>ProQuest Central (Corporate)</collection><collection>Access via ABI/INFORM (ProQuest)</collection><collection>ABI/INFORM Global (PDF only)</collection><collection>ProQuest Central (purchase pre-March 2016)</collection><collection>ABI/INFORM Global (Alumni Edition)</collection><collection>European Business Database (Alumni Edition)</collection><collection>ProQuest Central (Alumni) (purchase pre-March 2016)</collection><collection>ABI/INFORM Collection (Alumni Edition)</collection><collection>Research Library (Alumni Edition)</collection><collection>ProQuest Central (Alumni Edition)</collection><collection>ProQuest Central UK/Ireland</collection><collection>Asian & European Business Collection</collection><collection>ProQuest Central Essentials</collection><collection>ProQuest Central</collection><collection>Business Premium Collection</collection><collection>ProQuest One Community College</collection><collection>ProQuest Central Korea</collection><collection>Asian & European Business Collection (Alumni)</collection><collection>Business Premium Collection (Alumni)</collection><collection>ABI/INFORM Global (Corporate)</collection><collection>ProQuest Central Student</collection><collection>Research Library Prep</collection><collection>ProQuest Business Collection (Alumni Edition)</collection><collection>ProQuest Business Collection</collection><collection>ABI/INFORM Professional Advanced</collection><collection>ABI/INFORM Global</collection><collection>European Business Database</collection><collection>Research Library</collection><collection>Research Library (Corporate)</collection><collection>Research Library China</collection><collection>ProQuest One Business</collection><collection>ProQuest One Business (Alumni)</collection><collection>ProQuest One Academic Eastern Edition (DO NOT USE)</collection><collection>History Study Center</collection><collection>ProQuest One Academic</collection><collection>ProQuest One Academic UKI Edition</collection><collection>ABI/INFORM Collection China</collection><collection>ProQuest Central Basic</collection><jtitle>European review of economic history</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>FLANDREAU, MARC</au><au>FLORES, JUAN H.</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Bondholders versus bond-sellers? Investment banks and conditionality lending in the London market for foreign government debt, 1815–1913</atitle><jtitle>European review of economic history</jtitle><date>2012-11</date><risdate>2012</risdate><volume>16</volume><issue>4</issue><spage>356</spage><epage>383</epage><pages>356-383</pages><issn>1361-4916</issn><eissn>1474-0044</eissn><abstract>This paper offers a theory of conditionality lending in nineteenth-century international capital markets. We argue that ownership of reputation signals by prestigious banks rendered them able and willing to monitor government borrowing. Monitoring was a source of rent, and it led bankers to support countries facing liquidity crises in a manner similar to modern descriptions of "relationship" lending to corporate clients by "parent" banks. Prestigious bankers' ability to implement conditionality loans and monitor countries' financial policies also enabled them to deal with solvency. We find that, compared with prestigious bankers, bondholders' committees had neither the tools nor the prestige required for effectively dealing with defaulters. Hence such committees were far less important than previous research has claimed.</abstract><cop>Oxford</cop><pub>Cambridge University Press</pub><doi>10.1093/ereh/hes005</doi><tpages>28</tpages></addata></record> |
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source | JSTOR Archive Collection A-Z Listing; Oxford University Press Journals All Titles (1996-Current) |
subjects | 19th century Bank loans Bankers Banking crises Banks Borrowing Capital markets Collective action Debt Deficit financing Economic history Funding Investors Liquidity Loan defaults Loans Market shares Prestige Relationship banking Reputations Sovereign debt Stockholders Underwriting |
title | Bondholders versus bond-sellers? Investment banks and conditionality lending in the London market for foreign government debt, 1815–1913 |
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