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. 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.

Bibliographic Details

Main Author:	Nose, Manabu
Language:	English en_US
Published:	World Bank, Washington, DC 2014-01
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 https://hdl.handle.net/10986/16813
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