Quality of government institutions and spreads on sovereign credit default swaps

Chen, Hsien YiHsien YiChenSHENG-SYAN CHEN2023-05-162023-05-162018-1002615606https://scholars.lib.ntu.edu.tw/handle/123456789/631091We examine how the quality of government institutions affects the likelihood of sovereign default. We find both economically and statistically significant adverse effects of country governance indicators on sovereign credit default swap spreads. The evidence suggests that better-quality governance enhances a country's willingness to repay debt, and hence reduces the probability of sovereign default. The results still hold after we account for potential endogeneity and conduct a number of robustness tests.enCredit risk | Institutional quality | Sovereign defaultQuality of government institutions and spreads on sovereign credit default swapsjournal article10.1016/j.jimonfin.2018.05.0082-s2.0-85048593536WOS:000439371300005https://api.elsevier.com/content/abstract/scopus_id/85048593536