Why Did Belgium Pay Leopold’s Bonds?
A body of empirical research in finance has attempted to assess whether stocks associated with sinful behavior (companies selling alcohol, tobacco, gambling activities, etc.) suffer from a market penalty. This question has been less studied in the sovereign bond market, but there is some research finding similar penalties for some of the dodgier debts of sinful regimes such as the 1906 Tsarist bond issue and the 2017 Venezuelan Hunger Bond sale. In this article, we examine the presence of the sin penalty for the debts of one of the most odious of regimes ever: that of King Leopold II of the Congo Free State whose cruelty resulted in one of the first global human rights movements and his removal from power. The question we ask is whether, once information as to the genocidal behavior of Leopold’s minions became widespread in the early 1900s, the market imposed a penalty on Leopold’s borrowings. We find no evidence of any market penalty on the debt that funded Leopold’s misdeeds; even though there had been widespread condemnation of his behavior at the time. Why not?