Lin, Weiping
September 2001
Multinational Business Review (St. Louis University);Fall2001, Vol. 9 Issue 2, p33
Academic Journal
This paper examines the effects of the volatility of sovereigns' debt service capacity (DSC) indicators on the borrowing countries' DSC by using several theories and techniques in corporate finance study. Evidence has been found that sovereign DSC behavior is different from DSC behavior of corporations. This is probably because the major concern of a sovereign is the reputation of the nation so that a stable source of future international loans can be maintained. However, among medium-income countries, DSC indicators' volatility does affect a sovereign's DSC. This is probably because the governments in those countries are politically vulnerable and winning the voters become more important than maintaining the reputation abroad.


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