Do foreign lenders face different enforcement in the U.S.?
Sunay Mutlu
Overview Prior studies have shown that legal enforcement informs the features of debt contracts. We examine whether, in the United States, the debt contractual terms of foreign lenders differ from those of domestic lenders. We argue that foreign- led debt contracts include looser covenants, lower likelihood of performance pricing provisions, and fewer negative covenants. We control for variation in legal environments by identifying debt contracts governed by the contract law of the state of New York. We attribute the differences in enforcement within this setting to the liability of foreignness faced by foreign lenders, rather than legal differences that lead to heterogeneous contract enforcement across the United States.
28 | Summer Research Fellowship
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