Developing Country Debt and the Market Value of Large Commercial Banks / Steven C. Kyle, Jeffrey Sachs.

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Kyle, Steven C

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w1470.Publication details: Cambridge, Mass. National Bureau of Economic Research 1984.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: The effect on commercial banks of exposure to large amounts of developing country debt has been a topic of increasing concern in recent years. Fear of default on the part of the debtor countries has led to fears for the solvency of the creditor banks since in many cases the total of outstanding exposure to risky debtors exceeds the entire capital base of the banks involved. The paper presents a first effort towards measuring the effects of LDC debt exposure on the market value of large commercial value banks in the United States. Our results indicate that exposure to developing country debt has exerted a measurable and significant negative effect on the ratio of market to book value for these banks.

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Working Paper	Biblioteca Digital	Colección NBER	nber w1470 (Browse shelf(Opens below))	Not For Loan

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September 1984.

The effect on commercial banks of exposure to large amounts of developing country debt has been a topic of increasing concern in recent years. Fear of default on the part of the debtor countries has led to fears for the solvency of the creditor banks since in many cases the total of outstanding exposure to risky debtors exceeds the entire capital base of the banks involved. The paper presents a first effort towards measuring the effects of LDC debt exposure on the market value of large commercial value banks in the United States. Our results indicate that exposure to developing country debt has exerted a measurable and significant negative effect on the ratio of market to book value for these banks.