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Do bank lending relationships always enhance financial distress resolution? The case of Germany

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  • Andreas Rauterkus

Abstract

This article examines the financial distress resolution benefit of bank lending relationships in a system where because of the lack of access to public debt and equity markets, banks do not face competition as providers of capital. For a sample of German firms, this article finds that companies in financial distress are more likely to be liquidated if they have high amounts of bank debt. Furthermore, companies that are saved show higher potential for financial distress a year prior to bankruptcy. This suggests that certain aspects of value of bank lending relationships are dependent on the financial system in which they occur.

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  • Andreas Rauterkus, 2009. "Do bank lending relationships always enhance financial distress resolution? The case of Germany," Applied Economics Letters, Taylor & Francis Journals, vol. 16(4), pages 379-385.
    • Handle: RePEc:taf:apeclt:v:16:y:2009:i:4:p:379-385
    DOI: 10.1080/17446540802129784
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    Cited by:

    1. António Pedro Soares Pinto & Mário Gomes Augusto & Pedro M. Gama, 2010. "Bank Relationships And Corporate Governance: A Survey Of The Literature From The Perspective Of Smes," Portuguese Journal of Management Studies, ISEG, Universidade de Lisboa, vol. 0(1), pages 65-85.
    2. Jara, Mauricio & López-Iturriaga, Félix & San Martín, Pablo & Saona, Paolo & Tenderini, Giannina, 2019. "Chilean pension fund managers and corporate governance: The impact on corporate debt," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 321-337.
    3. Huang, Jiang-Chuan & Huang, Chin-Sheng & You, Chun-Fan, 2015. "Bank relationships and the likelihood of filing for reorganization," International Review of Economics & Finance, Elsevier, vol. 35(C), pages 278-291.

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