Game of Thrones: Leverage, Debt, and Financial Control
Sairam Moturi, Ph.D.
PhD in Accounting| Assistant Professor @IFMR| Career Mentoring
Chapter 3: Leverage, Debt, and Financial Control
In finance, leverage refers to using borrowed money to amplify returns, Among the various sources in terms of Cost of Capital Debt is cheaper source of finance. But it also increases risk. Many houses in Westeros relied on debt to finance their wars, and none more so than Stannis and the Iron Bank. The Iron Bank functioned like a powerful creditor, lending vast sums to those who could offer the best returns. However, if rulers failed to repay their debts, the Iron Bank would back their rivals (funded Stannis Baratheon), ensuring they were always on the winning side. This even explains the concept of Hedging in finance literature.
The Lannisters, with their gold mines from Casterly rock, were less reliant on external debt. They had a stronger debt-to-equity ratio, meaning they could afford to finance their own wars without borrowing heavily. This gave them an advantage in the long run, allowing them to retain more control over their finances. But due to over usage of debt during the reign of Robert Baratheon Cersei being the self proclaimed queen of Iron Throne paid the debt owed to Iron bank by the Capital from the funds they acquired from High Garden, Further Cersei Lannister takes the help of Iron Bank to fund the military expenses to use the services of Golden company army for their services to defend/ wage war against dragon queen Daenerys Targaryen.
From the other point of view Jon Snow takes the leverage via human capital from Wildlings (free folk) houses from the north (eg: Lady olenna, Vale prince) to defend the mankind from White walkers and the army of dead which was successful eventually though loosing so many resources is inevitable.
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In contrast, Robert Baratheon, when he sat on the Iron Throne, was a poor financial manager. His reign was characterized by lavish spending, debt accumulation, and financial mismanagement. The kingdom’s coffers were drained by constant celebrations and tournaments, and by the time Robert died, the Iron Throne was deeply in debt to the Iron Bank. Robert’s failure to control spending was a classic case of poor financial governance—like a company CEO who prioritizes short-term pleasures over long-term financial stability.
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