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- Title
Information asymmetries and conflict of interest during the Baring crisis, 1880–1890.
- Authors
Flores, Juan H.
- Abstract
This article examines the potential conflict of interest of underwriters in London's foreign sovereign debt markets prior to the Baring crisis of 1890. We describe the main sources of information for investors concerning Argentina, whose government debt default contributed to Baring's collapse, and compare them with those of the underwriters, particularly Baring's. We then present some empirical evidence using data on bond prices and underwriting fees that demonstrate that Baring did not exploit its information lead to the detriment of investors. Finally, we present historical evidence that shows that Baring foresaw default before markets did and consequently planned a bailout loan that could not be issued due to political instability in Buenos Aires.
- Subjects
BUENOS Aires (Argentina); BARING Brothers &; Co.; INFORMATION asymmetry; INSURANCE; BRITISH insurance companies; FINANCIAL crises; CONFLICT of interests; BUSINESS ethics; PUBLIC debts; POLITICAL stability; BOND prices; ARGENTINIAN economy; NINETEENTH century
- Publication
Financial History Review, 2011, Vol 18, Issue 2, p191
- ISSN
0968-5650
- Publication type
Article
- DOI
10.1017/S0968565011000060