Quotation Randl, Otto, Zechner, Josef. 2018. Sovereign Reputation and Yield Spreads: A Case Study on Retroactive Legislation. German Economic Review. 19 (3), 260-279.




This paper uses recent legislation in Austria to establish a link between sovereign reputation and yield spreads. In 2009, Hypo Alpe Adria International, a bank previously co‐owned by the regional government of Carinthia, had been nationalized by Austria's central government in order to avoid a default triggering multi‐billion Euro local government guarantees. In 2015, special legislation retroactively introduced collective action clauses allowing a haircut on both the bonds and the guarantees while avoiding formal default. We document that legislative and administrative action designed to partly abrogate the guarantees resulted in a loss of reputation, leading to higher yield spreads for sovereign debt. Our analysis of covered bonds uncovers an increase in yield spreads on the secondary market and a deterioration of primary market conditions.


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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal German Economic Review
Citation Index SSCI
WU Journalrating 2009 A
WU-Journal-Rating new FIN-A, STRAT-B, VW-D, WH-B
Language English
Title Sovereign Reputation and Yield Spreads: A Case Study on Retroactive Legislation.
Volume 19
Number 3
Year 2018
Page from 260
Page to 279
Reviewed? Y
DOI https://doi.org/10.1111/geer.12128
Open Access N
JEL G12, G14, H63


Randl, Otto (Details)
Zechner, Josef (Details)
Institute for Finance, Banking and Insurance IN (Details)
Research Institute for Capital Markets FI (Details)
Research areas (ÖSTAT Classification 'Statistik Austria')
5358 Corporate finances (Details)
5361 Financial management (Details)
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