Multiple Lenders and Corporate Distress: Evidence on Debt Restructuring

Jan Krahnen () and Antje Brunner

No 4287, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In the recent theoretical literature on lending risk, the common pool problem in multi-bank relationships has been analysed extensively. In this Paper we address this topic empirically, relying on a unique panel dataset that includes detailed credit-fie 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; Coordination risk; Bankruptcy (search for similar items in EconPapers)
JEL-codes: D74 G21 G33 G34 (search for similar items in EconPapers)
Date: 2004-03
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Multiple Lenders and Corporate Distress: Evidence on Debt Restructuring (2008)
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