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Published Articles for Year 2021
Multinational Finance Journal, 2021, vol. 25, no.3/4, pp. 73–83
Elena Duggar , Moody's Investors    Corresponding Author

Abstract:
The G-20 Debt Service Suspension Initiative (DSSI) was endorsed effective May 1, 2020, in the midst of an unprecedented fall in government revenues and rapidly rising public expenditure following the COVID-19 shock and resulting deep economic contraction. By the end of 2020, 45 of the 73 eligible countries had participated in the initiative. By March 18, 2021, 24 countries had participated in the extended DSSI. The G-20 DSSI initiative will alleviate liquidity pressures for participating countries, but in general the savings from debt relief under the DSSI are modest relative to the fiscal deterioration brought about by the COVID-19 shock. Countries eligible for the DSSI and the Common Framework for Debt Treatments differ greatly in terms of their debt-to-GDP levels, debt sustainability positions and credit risk, potential benefits from DSSI debt relief, and creditor universe. This diversity will necessitate tailored approaches to debt relief, taking into account country-specific circumstances.

Keywords : DSSI; common framework; sovereign debt restructuring and default; country risk; creditworthiness; debt crisis
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Multinational Finance Journal, 2021, vol. 25, no. 1/2, pp. 1-61
Christina Vadasi , University of the Aegean, Greece
Michalis Bekiaris , University of the Aegean, Greece
Andreas Andrikopoulos , University of the Aegean, Greece    Corresponding Author

Abstract:
Internal audit is fundamental in maintaining transparency in the dissemination of information about a company’s financial position and performance. In this respect, the quality of internal audit is essential for effective corporate governance. We construct a composite measure of the quality of the internal audit function and explore its association with "good" corporate governance. Employing data from 45 listed companies in the Athens Stock Exchange, we discover that "good" corporate governance affects internal audit function quality, since the internal audit function is better in companies that comply with certain corporate governance guidelines. On the other hand, we find limited evidence on the effect of internal audit function quality on effective corporate governance. We also discover that internal audit’s active role in corporate governance is shaped by company-wide characteristics such as size, internationalization and CEO duality.

Keywords : internal audit; internal audit function; quality; corporate governance; Athens Stock Exchange; survey
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Multinational Finance Journal, 2021, vol. 25, no.3/4, pp. 63–71
Michael G. Papaioannou , International Monetary Fund    Corresponding Author
George Tsetsekos , Drexel University

Abstract:
The unprecedented contraction in global economic activity from the COVID-19 pandemic drew decisive domestic fiscal and monetary policy measures to ameliorate demand and supply implications, reduce systemic risks and maintain financial stability. However, medium-term vulnerabilities have risen because of these measures. In particular, sovereign and corporate debt levels have increased amid massive fiscal stimulus spending, contributing to explosive debt accumulation in advanced economies, emerging markets, and low-income countries. As a result, issues of risk and sustainability have emerged. The increase in public debt necessitates the development of careful debt management strategies to avoid risks and debt distress situations that could lead to sovereign debt restructurings.

Keywords :
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Multinational Finance Journal, 2021, vol. 25, no.3/4, pp. 85–99
Thordur Jonasson , International Monetary Fund    Corresponding Author
James Knight , International Monetary Fund

Abstract:
This paper discusses the impact of the Covid-19 pandemic on global debt and on debt management practices, with a focus on the state of debt management prior to the pandemic, the responses of country authorities to the challenge, and how debt management is likely to change in the future.

Keywords :
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Multinational Finance Journal, 2021, vol. 25, no.3/4, pp. 101–114
Rafael M. Molina , Newstate Partners LLP, UK    Corresponding Author

Abstract:
This paper discusses the evolution of sovereign debt management over the past two decades, highlights the need for its further evolution in light of the continuous efforts to build sustainable debt and growth policies, and outlines some views on its future following the ensuing challenges from the Covid-19 pandemic. The paper also outlines some key lessons and considerations for sovereign debt restructurings that might emerge as a result of Covid-19-related sovereign debt distresses and concludes by stressing the need of integrating sovereign debt management with fiscal and monetary policies.

Keywords :
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Multinational Finance Journal, vol. 25, no.3/4, pp. 115-149
Michael G. Papaioannou , International Monetary Fund    Corresponding Author
George Tsetsekos , Drexel University

Abstract:
This paper examines the causes, processes, and outcomes of the sovereign debt restructuring episodes that occurred during 2020-2021 in the context of the prevailing IMF sovereign debt restructuring framework and the G20 debt relief initiatives for LICs instituted as a result of the Covid-19 economic implications. The central role of debt sustainability analysis in the IMF sovereign debt restructuring framework is presented for both low-income countries and countries that maintain market access. Based on the observed salient features of the recent restructurings, we point out common traits in the behavior of involved stakeholders and draw lessons on facilitating sovereign and creditor attributes for efficient sovereign debt resolutions.

Keywords :
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Multinational Finance Journal, 2021, vol. 25, no.3/4, pp. 163-186
Tamon Asonuma , International Monetary Fund    Corresponding Author
Michael G. Papaioannou , International Monetary Fund
Takahiro Tsuda , World Bank, USA

Abstract:
Cyprus’ domestic sovereign debt restructuring in 2013 was undertaken in the context of the country’s economic adjustment programs. The government agreed to a € 9.0 billion program with the European Stability Mechanism on March 25, 2013 and a €1.0 billion program with the International Monetary Fund on May 13, 2013 (both programs were concluded at end-March 2016). In this context, Cyprus’ second-largest bank, the Cyprus Popular Bank (CPB), was closed, and a unique bail-in mechanism was applied, with a one-time bank deposit levy (haircut) imposed on all uninsured deposits of CPB and on 47.5 percent of uninsured deposits of the largest commercial bank, the Bank of Cyprus (BoC). No insured deposit of Euro 100,000 or less would be affected. The debt restructuring was successful in attaining substantial debt relief, reducing the country’s debt-to-GDP ratio, and restoring financial stability, although at a high cost for some depositors. The bail-in of both resident and nonresident depositors helped mitigate the burden of high bank recapitalization for the general public.

Keywords : Sovereign Debt; Sovereign Debt Restructuring; Cyprus; Banking Crisis; Financial Stability Policy;
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Multinational Finance Journal, 2021, vol. 25, no.3/4, pp. 151–161
Elena Duggar , Moody’s Investors Service, USA    Corresponding Author
Gabriel Torres , Moody’s Investors Service, USA
Claire Li , Moody’s Investors Service, USA
Gabriel Agostini , Moody’s Investors Service, USA

Abstract:
Argentina’s 2020 debt restructuring was the second largest sovereign restructuring in history, after Greece’s in 2012. The sovereign’s latest default was triggered by extending maturities on short-term debt in August 2019, followed by another postponement of short-term debt payments in December 2019 and long-term debt payments in February 2020. In August 2019, the government also announced its intention to restructure its long-term debt. This article compares Argentina’s sovereign debt crisis with prior sovereign bond defaults and sets forth Moody’s view that significant challenges result in Argentina’s creditworthiness remaining weak even after the debt restructuring and despite sizeable losses for investors. These challenges include Argentina’s large share of foreign-currency debt amid its dependence on external foreign-exchange financing and limited domestic funding options, and subdued economic prospects as the coronavirus pandemic deepened the country’s multi-year recession and also affected Argentina’s main trading partners.

Keywords : Sovereign debt restructuring; sovereign debt default; country risk; creditworthiness; debt crisis.
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Multinational Finance Journal, 2021, vol. 25, no. 3/4, pp. 187–217
Kay Chung , International Monetary Fund    Corresponding Author
Michael G. Papaioannou , International Monetary Fund

Abstract:
This paper analyzes the effects of the inclusion of enhanced collective action clauses (CACs) in international (nondomestic law-governed) sovereign bonds on borrowing costs, using secondary-market bond yield spreads, during September 2014 to March 2021. Our findings indicate that in the period September 2014 to February 2020, where no restructuring episodes have occurred, enhanced CACs are negatively associated with sovereign bond yield spreads and cosequently lower borrowing costs. However, during the COVID-19 period of March 2020 to March 2021, when the Argentina and Ecuador sovereign debt restructurings occurred, investors bond pricing behavior was differentiated depending on the inclusion or not of enhanced CACs, with their inclusion being positively associated with yield spreads, maybe due to the lack of flexibility of investors binded by the enhanced CACs provisions. The results obtained for September 2014 to February 2020 continue to hold when the sample is extended to March 2021.

Keywords : collective action clause; sovereign bond contractual clause; governing law; sovereign debt restructuring; default; bond spreads; sovereign cost of borrowing.
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Multinational Finance Journal, 2021, vol. 25, no. 3/4, pp. 219-245
Demetra Demetriou , Neapolis University Pafos, Cyprus    Corresponding Author

Abstract:
The aim of the paper is to stimulate the discussion around the recent increase in NPLs across several industrial countries by proposing a remedy framework for the resolution of non-performing loans (NPLs). The framework focuses on providing a reprieve to borrowers until they can recover financially and regain the ability to service their loans. In this respect, this paper proposes the establishment of a state-owned asset management company and attempts to find a balance between incentivizing the participation of banks regarding the disposal of NPLs and limiting risks to the state while avoiding moral hazard situations.

Keywords : Non-performing loans (NPLs); remedy framework; asset management company; lending behavior; moral hazards
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