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Debt Renegotiation and the Design of Financial Contracts

Christophe Godlewski ()

Journal of Financial Services Research, 2019, vol. 55, issue 2, No 5, 215 pages

Abstract: Abstract This study examines the design of financial contracts after renegotiations. It focuses on the degree of renegotiation as measured by the number of amendments to the contract. I find that the design of renegotiated financial contracts is not homogenous, although the most frequent amendments are to the loan’s amount and maturity. I show that the number of amendments increases with longer maturities. Collateral and bank reputation have the opposite effect. Creditors friendly environments with fewer renegotiation frictions increase the number of amendments. Overall, contractual, organizational, and legal features have a significant influence on the design of financial contracts after renegotiation.

Keywords: Financial contracts design; Bank loans; Debt renegotiation (search for similar items in EconPapers)
JEL-codes: G10 G21 G24 (search for similar items in EconPapers)
Date: 2019
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Working Paper: Debt renegotiation and the design of financial contracts (2016) Downloads
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DOI: 10.1007/s10693-019-00311-x

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Handle: RePEc:kap:jfsres:v:55:y:2019:i:2:d:10.1007_s10693-019-00311-x