Skip to: search, navigation, or content.


Indiana University Bloomington

BEPP

The Kelley Advantage

The department is home to the authors of Managerial Economics and Business Strategy and Games and Information: An Introduction to Game Theory, two of the nation’s leading textbooks in the field.

Research and Publications

Journal Articles

Government Debt, Reputation and Creditors’ Protections: The Tale of San Giorgio

2006, Review of Finance

Michele U. Fratianni

Abstract

San Giorgio (1407-1805) was a formal association aimed at protecting creditors’ rights and reducing the risk of debt repudiation by the Republic of Genoa. The behavior of this institution is broadly consistent with debt models that predict lending if lenders can impose big penalties on debtors, and models in which lenders can differentiate between excusable and inexcusable defaults. San Giorgio shareholders enjoyed low credit risk but also lower returns on capital than those prevailing on comparable foreign assets for which creditors’ protection mechanisms were lacking. The Republic’s quid pro quo was a low cost of financing. Differences in credit risk were an important explanation of differences in long-term interest rates across countries in 16th and 17th century Europe, a point not sufficiently emphasized by the literature.

Citation

Fratianni Michele U. (2006), "Government Debt, Reputation and Creditors’ Protections: The Tale of San Giorgio," Review of Finance, 2006, Vol. 10 (4): 487-506.

Keywords

government debt, reputation, creditors’ protections, San Giorgio, Genoa