## Sovereign Default Risk and Private Sector Access to Capital in Emerging Markets

_IMF Working Papers, January 1, 2010_

## Source details

**Canonical URL:** [Sovereign Default Risk and Private Sector Access to Capital in Emerging Markets](https://www.imf.org/en/publications/wp/issues/2016/12/31/sovereign-default-risk-and-private-sector-access-to-capital-in-emerging-markets-23510)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/31/sovereign-default-risk-and-private-sector-access-to-capital-in-emerging-markets-23510/index.md)
- [Structured JSON version](/en/publications/wp/issues/2016/12/31/sovereign-default-risk-and-private-sector-access-to-capital-in-emerging-markets-23510/index.json)
- [Bundle manifest](/en/publications/wp/issues/2016/12/31/sovereign-default-risk-and-private-sector-access-to-capital-in-emerging-markets-23510/bundle-manifest.json)

## Bibliographic details
- Authors: Udaibir S Das, Michael G. Papaioannou, Christoph Trebesch
- Published: January 1, 2010
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451961942.001

---

### Summary and main findings
- Top down spillovers of sovereign default risk can have serious consequences for the private sector in emerging markets.
- The paper analyzes effects using firm-level data from 31 emerging market economies.
- The study assesses how sovereign risk affects corporate access to international capital markets in the form of external credit (loans and bond issuances) and equity issuances.
- Overall finding: sovereign default risk is a crucial determinant of private sector access to capital, whether external debt or equity.
- Crisis resolution patterns matter: defaults towards private creditors have stronger adverse consequences than defaults to official creditors.
- Time periods analyzed:
  - Impact of sovereign debt crises during the 1980s and 1990s.
  - The 1993 to 2007 period, using additional measures of sovereign risk—sovereign bond spreads and sovereign ratings—as explanatory variables.

### Data, measures, and scope
- Firm-level data covering 31 emerging market economies.
- Capital access outcomes considered:
  - External credit: loans and bond issuances.
  - Equity issuances.
- Sovereign risk measures employed:
  - Sovereign debt-crisis episodes (1980s and 1990s analysis).
  - Sovereign bond spreads (1993 to 2007 analysis).
  - Sovereign ratings (1993 to 2007 analysis).

### Policy implications and interpretation
- Sovereign default risk transmission to the private sector reduces firms’ ability to obtain external finance via both debt and equity channels.
- The mode of crisis resolution influences private-sector outcomes; restructuring that imposes losses on private creditors is associated with stronger adverse effects on private access to capital than restructurings involving official creditors.
- Implicit recommendation: managing sovereign risk and designing crisis-resolution frameworks that limit adverse spillovers to the private sector can help preserve private access to international capital markets.

---

## Content in this bundle

- **_wp1010**
  - [_wp1010 (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2010/_wp1010.pdf.md){rel="alternate" type="text/markdown"}
  - [_wp1010 (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2010/_wp1010.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/sovereign-default-risk-and-private-sector-access-to-capital-in-emerging-markets-23510_