Multiple Lenders and Corporate Distress: Evidence on Debt Restructuring

45 Pages Posted: 20 Mar 2002

See all articles by Antje Brunner

Antje Brunner

Humboldt University of Berlin

Jan Pieter Krahnen

Goethe University Frankfurt

Multiple version iconThere are 2 versions of this paper

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

Brunner, Antje and Krahnen, Jan Pieter, Multiple Lenders and Corporate Distress: Evidence on Debt Restructuring (July 2002). Available at SSRN: https://ssrn.com/abstract=302351 or http://dx.doi.org/10.2139/ssrn.302351

Antje Brunner (Contact Author)

Humboldt University of Berlin ( email )

Unter den Linden 6
D-10178 Berlin, AK 10099
Germany
+49 30 4748 3880 (Phone)

Jan Pieter Krahnen

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

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