| Résumé :
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Though sovereign debts are often viewed as risk-free assets, some extreme events may lead to the repudiation of these debts. A large literature has been devoted to the motivations of repayment and to the causes of default. The impact of wars, which may lead to the repudiation of sovereign debt, on sovereign bond prices has also been analyzed. However, the impact of other types of seldom occurring but dramatic events, which may lead to the repudiation of debts, on bond prices has been overlooked. My current research aims to analyze three of them: the repudiation of debts because of their alleged "odiousness", the introduction of common debt after a state's unification and the debt partition following the break-up of a country. Since the events under consideration don't happen frequently, the dissertation will rely on four historical examples: Cuba, Russia, Italy and Belgium. The time period considered is the 19th century. Based on a historical analysis and the set-up of an original database, this project determines the effects of these events on sovereign debt valorization, using an econometric approach. The first part of the research estimates the risk premium required by investors to hold debts which could be denounced as odious. Bondholders could require a premium to compensate for the higher default risk due to the odious character of the debts. The paper quantifies the risk premium required by investors to hold debts which could be denounced as odious and it analyses the relation between the value of the government bond and extreme "odious debt" events. In order to identify if such a premium exists, I focus on a Cuban case study. Based on an original database of Cuban bonds, the paper reveals the existence of a risk premium of at least 200 basis points which penalises bonds issued by dictatorial regimes. The bond market "odious" shocks are provided by a Structural VAR analysis. In a second case study, my research analyses the Tsarist bonds of 1906 and the premium to hold despotic regime debt. The paper shows that the market required a premium despite the attempts made by the Russian government to present the loan as clean. The second and third parts of my research look at the effects of state succession on the sovereign bonds market. They analyze respectively the two subsets of state succession: state unification and "country break-up". The second part of the dissertation provides an empirical study of sovereign debt integration and analyses the evolution of sovereign bond prices when several countries merge to become a "unified country" or when the probability of such an event exists. Based on an original database made of pre-unification and post-unification Italian bonds, the paper shows the impact of Italy's unification on the bonds. The analysis puts forward that prior to the unification in 1862, the bonds issued by the future parts of the kingdom reacted in an idiosyncratic way. Around the sovereign debt integration, the paper highlights a large risk increase for low-yield bonds. Using a break point analysis and a Dynamic Factor Model, the paper proves that until the late 1860's the financial market did not believe in Italy's Unification. The third part of my research analyzes the financial impact on state bonds of a country which faces a risk to break up. This paper provides an empirical analysis of the evolution of sovereign debt prices when a state breaks up, or when it faces such an event. Based on an original database of Dutch and Belgian bonds, this research shows the impact of Belgian independence in 1830 on the Belgium bonds. This article analyses two risk premiums which may affect the sovereign debt of a state: the first one is linked to the country break-up (or the probability that one may occur) and the second one is due to the instability experienced by the new country. This analysis puts forward a "country break-up" risk premium of 142 basis points. The role of the debt underwriter has also been highlighted in the case of Belgian independence. Financial markets required no "new country" risk premium for Belgian bonds which were underwritten by Rothschild, but the risk premium remained for the Belgian authorities. This was likely due to the role of Rothschild as underwriter whose reputation persuaded the market that the risk is low, but who charged a premium to the Belgian government for their services. |
