Multiple Lenders and Corporate Distress: Evidence on Debt Restructuring
45 Pages Posted: 20 Mar 2002
There are 2 versions of this paper
Multiple Lenders and Corporate Distress: Evidence on Debt Restructuring
Multiple Lenders and Corporate Distress: Evidence on Debt Restructuring
Date Written: July 2002
Abstract
In the recent theoretical literature on lending risk, the common pool problem in multi-bank relationships has been analyzed extensively. In this paper we address this topic empirically, relying on a unique panel data set that includes detailed credit-file information on distressed lending relationships in Germany. In particular, it includes information on bank pools, a legal institution aimed at coordinating lender interests in borrower distress. We find that the existence of small bank pools increases the probability of workout success and that coordination costs are positively related to pool size. We identify major determinants of pool formation, in particular the distribution of lending shares among banks, the number of banks, and the severity of the distress shock to the borrower.
Keywords: Bank Lending, Bank Pool, Distress, Reorganization, Co-ordination Risk, Bankruptcy
JEL Classification: D74, G21, G33, G34
Suggested Citation: Suggested Citation
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