The effects of bank relationships on firm private debt restructuring: Evidence from an emerging market

Jiang-Chuan Huang and Chin-Sheng Huang

Research in International Business and Finance, 2011, vol. 25, issue 1, 113-125

Abstract: Our paper seeks to examine the direct benefit of bank relationships for a distressed borrower by assessing its influence on the success of firm private debt restructuring. We find that a distressed firm with a stronger bank relationship has a greater probability to successfully restructure its debt through private renegotiation. Accordingly, an analysis of credit rating recovery provides complementary evidence on the factors of successful debt restructuring. A duration analysis of the length of time needed for a debt restructuring to be completed is fully consistent with our documented results. We conclude that in a bank dominated financial system like Taiwan's where firms are heavily bank-dependent, the bank-firm relationship is of crucial importance to the success of financially distressed firms in private debt restructuring.

Keywords: Bank; relationship; Debt; restructuring; Private; renegotiation; Financial; distress (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:25:y:2011:i:1:p:113-125

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