Triggers of Contract Breach : Contract Design, Shocks, or Institutions?

This paper constructs a large contract-level data set to examine factors that trigger breach of foreign investment contracts. Similar to the case of outright expropriation, political regime type is an important determinant of breach of contract. Fu...

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Bibliographic Details
Main Author:	Nose, Manabu
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	ADJUSTMENT MECHANISM AFFILIATED ORGANIZATIONS ARBITRAL AWARDS ARBITRATION ARBITRATIONS BANK POLICY BARGAINING BARGAINING POWER BILATERAL INVESTMENT TREATIES BREACH BREACH OF CONTRACT BREACHES BUSINESS CLIMATE CAPITAL INVESTMENTS CHECKS CLAIMANT COMMODITIES COMMODITY COMMODITY EXPORTS COMMODITY PRICE COMMODITY PRICES COMPETITIVE BIDDING CONSUMPTION EXPENDITURE CONTRACT DESIGN CONTRACT DESIGNS CONTRACT DISPUTES CONTRACT ENFORCEMENT CONTRACT RENEGOTIATION CONTRACTUAL AGREEMENT CONTRACTUAL DISPUTE CONTRACTUAL DISPUTES CONTRACTUAL OBLIGATIONS CONTRACTUAL PERIOD CONTRACTUAL TERMS DATA AVAILABILITY DECENTRALIZATION DEMOCRACIES DEMOCRACY DEVALUATION DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPMENT BANK DEVELOPMENT ECONOMICS DISTRIBUTION OF INCOME DOUBLE TAXATION DUMMY VARIABLE ECONOMIC CRISIS ECONOMIC DEVELOPMENT ECONOMIC FLUCTUATIONS ECONOMIC GROWTH ECONOMIC POLICIES ECONOMICS EQUITY INVESTMENTS EXCHANGE RATE EXISTING CONTRACTS EXPIRATION OF CONTRACTS EXPORTER EXPORTERS EXPOSURE EXPOSURES EXPROPRIATION EXPROPRIATION RISK EXPROPRIATIONS EXTERNAL DEBT FINANCE CORPORATION FINANCIAL CRISIS FISCAL CAPACITY FIXED EFFECT MODEL FOREIGN DIRECT INVESTMENT FOREIGN INVESTMENT FOREIGN INVESTMENTS FOREIGN INVESTORS FOREIGN TRADE GLOBALIZATION GOVERNMENT GUARANTEE GOVERNMENT GUARANTEES GROWTH RATES HOST COUNTRIES HOST COUNTRY HOST GOVERNMENT HOST GOVERNMENTS INCOME INCOME INEQUALITY INCOME LEVEL INCOMPLETE CONTRACT INCOMPLETE CONTRACTS INFRASTRUCTURE CONCESSIONS INFRASTRUCTURE INVESTMENTS INFRASTRUCTURE PROJECTS INITIAL CONTRACT INSURANCE INSURERS INTERNATIONAL ARBITRATIONS INTERNATIONAL BANK INTERNATIONAL BUSINESS INTERNATIONAL CAPITAL INTERNATIONAL CAPITAL MARKET INTERNATIONAL COMMERCIAL ARBITRATION INTERNATIONAL COURT INTERNATIONAL FINANCE INTERNATIONAL FINANCIAL INSTITUTIONS INTERNATIONAL INVESTORS INTERNATIONAL LAW INTERNATIONAL TRADE INVESTING INVESTMENT BANK INVESTMENT CONTRACTS INVESTMENT FLOWS INVESTMENT PERIOD LAW ENFORCEMENT LIQUIDITY LIQUIDITY CONSTRAINT LOCAL ECONOMY LOCAL SECURITY LOW-INCOME COUNTRIES MACROECONOMIC VARIABLES MARGINAL COST MATURITY MIDDLE-INCOME COUNTRIES MONETARY FUND MONOPOLY MULTILATERAL INVESTMENT GUARANTEE AGENCY MULTINATIONAL CORPORATIONS NATURAL DISASTER NATURAL DISASTERS NATURAL RESOURCE NATURAL RESOURCES NEGATIVE INCOME SHOCKS NEGOTIATIONS NEW CONTRACT NOMINAL VALUE NPL OIL PRICE ORIGINAL CONTRACTS PARTICIPATIONS PAYMENT GUARANTEE PAYMENT OBLIGATIONS POLITICAL ECONOMICS POLITICAL ECONOMY POLITICAL INSTITUTIONS POLITICAL POWER POLITICAL POWERS POLITICAL REGIME POLITICAL RISK POLITICAL RISK INSURANCE PRICE ADJUSTMENT PRICE CHANGE PRICE RISK PRICE SERIES PRICE VOLATILITY PRIVATE ENTITIES PRIVATE INFRASTRUCTURE PRIVATE INVESTMENT PRIVATE INVESTMENTS PRIVATE INVESTOR PRIVATE INVESTORS PRIVATIZATION PROCUREMENT PRODUCTIVE INVESTMENTS PROFIT MARGIN PROPERTY RIGHT PROPERTY RIGHTS PROVISION OF GUARANTEES PUBLIC INVESTMENTS PUBLIC POLICY PUBLIC-PRIVATE PARTNERSHIP REGIONAL DUMMIES RENTS REPUDIATION REPUTATION RISK APPETITE RISK AVERSION RISK MANAGEMENT RISK REDUCTION SETTLEMENT SOLICITATION SOVEREIGN DEBT SOVEREIGN DEFAULT SOVEREIGN DEFAULTS SUSTAINABLE DEVELOPMENT TAX TAX REVENUE TAX REVENUES TERMINATION TRANSACTION TRANSACTION COSTS TRANSPARENCY TREATIES TREATY TURNOVER TURNOVERS UNSOLICITED PROPOSALS
Online Access:	http://documents.worldbank.org/curated/en/2014/01/18756215/triggers-contract-breach-contract-design-shocks-or-institutions http://hdl.handle.net/10986/16813

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Summary:	This paper constructs a large contract-level data set to examine factors that trigger breach of foreign investment contracts. Similar to the case of outright expropriation, political regime type is an important determinant of breach of contract. Furthermore, although investors' bargaining power becomes obsolete as contracts mature, contracts can be designed to mitigate the risk of breach of contract by involving multilateral organizations and creating buffers to absorb commodity price shocks. The paper examines the type of countries prone to contract breaches. After controlling for regional and sector fixed effects, less-democratic and resource-dependent governments are more likely to breach contracts, especially after large global shocks, notably natural disasters.

Triggers of Contract Breach : Contract Design, Shocks, or Institutions?

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