Debt renegotiation under reputation concerns and tolerance for failure

Hind Sami ()
Additional contact information
Hind Sami: COACTIS - COnception de l'ACTIon en Situation - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne

Post-Print from HAL

Abstract: We propose a career concern model where a privately informed entrepreneur reports the firm financial situation. On this basis, the creditor may offer debt renegotiation. Due to reputation concerns, the entrepreneur may feel reluctant to restructure and may manipulate information. We analyze how creditor attitude towards failure and entrepreneurs reputation concerns interact and influence the restructuring decision. We show that debt renegotiation under more lenient conditions discourages manipulation because entrepreneurs are ensured that their reputation will not suffer from revealing financial difficulties. Intolerant creditors make entrepreneurs more concerned about reputation weakening their incentives to restructure, leading to inefficient continuation of investments.

Date: 2019-11-11
References: Add references at CitEc
Citations:

Published in Managerial and Decision Economics, 2019, 41 (1), pp.36-48. ⟨10.1002/mde.3090⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-04877753

DOI: 10.1002/mde.3090

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().