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In this article, we examine the relations between risk, the choice of foreign or local contract terms (parameters), and maturity in the sovereign debt market. Our primary finding is that the maturities of bonds that carry a meaningful degree of risk are greater when the bonds are written under foreign parameters. This finding is consistent with the Credible Commitment Theory. Relinquishing certain key contractual parameters (governing law, jurisdiction, currency, listing) precludes the issuing sovereign from taking actions that would diminish the wealth of its bondholders after the bonds have been issued. Correspondingly, the yield on lower-grade bonds, written under foreign parameters, is less than the yield on bonds written under local parameters. Investors are willing to pay a premium for lower-grade bonds if they are written in foreign parameters. Finally, we find a positive relation between maturity and S&P ratings for the subsample of lower-grade bonds. However, we find no such relation for the subset of high-grade bonds. [ABSTRACT FROM AUTHOR]

This paper reviews the empirical literature on the links between finance and growth with a special focus on the literature that has shown that the marginal contribution of financial depth to economic growth becomes negative in countries with large financial sectors (the 'too much finance' result). It then assesses the empirical and theoretical validity of recent criticisms to this literature and concludes by discussing avenues for future research aimed at identifying the channels through which a very large financial sector can slow down economic growth. Keywords Financial development ? Finance-growth Nexus * Too much finance JEL Classification G10 * 016 * F36 * 040, Introduction The idea that finance plays a key role in the process of economic development was central in the work of Bagehot (1873) and Schumpeter (1911). More recently, Levine (2005) [...]