Private debt renegotiation and financial institutions' network

Christophe Godlewski and Bulat Sanditov
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Bulat Sanditov: Université Paris-Saclay, Univ Evry, IMT-BS, LITEM

Working Papers of LaRGE Research Center from Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg

Abstract: We study the influence of financial institutions’ network on private debt renegotiation outside of distress. Lenders with a network-central position have access to superior private information, are more experienced and trustworthy and have a greater reputational capital. Using a large sample of more than 10.000 loans issued in 25 European countries we find that network-central lenders have a significant influence on the renegotiation process. Such lenders increase the likelihood of renegotiation, the number of renegotiation rounds, and the number of amendments to the loan agreement. Our findings survive multiple robustness checks and confirm that access to superior information, greater experience, reputation, and trust encourages private debt renegotiation.

Keywords: financial contracts; bank loan; renegotiation; syndicated lending; social network analysis; lender network; lender centrality. (search for similar items in EconPapers)
JEL-codes: G21 G24 G32 G34 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-net
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Persistent link: https://EconPapers.repec.org/RePEc:lar:wpaper:2020-01

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