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Corporate Debt Restructuring: Evidence on Lending Coordination in Financial Distress

Author

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  • Krahnen, Jan-Pieter
  • Brunner, Antje

Abstract

We analyse the coordination problem in multi-creditor relationships empirically, relying on a unique panel data set that contains detailed credit-file information on distressed lending relationships in Germany, including information on creditor pools, a legal institution aiming at coordinating lender interests in borrower distress. We report three major findings. First, the existence of creditor pools increases the probability of workout success. Second, the results are consistent with coordination costs being positively related to pool size. Third, major determinants of pool formation are found to be the number of banks, the distribution of lending shares, and the severity of the distress shock.

Suggested Citation

  • Krahnen, Jan-Pieter & Brunner, Antje, 2001. "Corporate Debt Restructuring: Evidence on Lending Coordination in Financial Distress," CEPR Discussion Papers 3030, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:3030
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    Citations

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    Cited by:

    1. Itzhak Gilboa & David Schmeidler, 2003. "Inductive Inference: An Axiomatic Approach," Econometrica, Econometric Society, vol. 71(1), pages 1-26, January.
    2. Hallak, Issam, 2002. "Why borrowers pay premiums to larger lenders: Empirical evidence from sovereign syndicated loans," CFS Working Paper Series 2002/02, Center for Financial Studies (CFS).
    3. Ongena, Steven & Tümer-Alkan, Günseli & Westernhagen, Natalja v., 2012. "Creditor concentration: An empirical investigation," European Economic Review, Elsevier, vol. 56(4), pages 830-847.
    4. Stephen Morris & Hyun Song Shin, 2000. "Global Games: Theory and Applications," Cowles Foundation Discussion Papers 1275, Cowles Foundation for Research in Economics, Yale University.
    5. Arturo Bris & Ivo Welch, 2005. "The Optimal Concentration of Creditors," Journal of Finance, American Finance Association, vol. 60(5), pages 2193-2212, October.
    6. Morris, Stephen & Shin, Hyun Song, 2004. "Coordination risk and the price of debt," European Economic Review, Elsevier, vol. 48(1), pages 133-153, February.
    7. Bukovšek Marjeta Zorin & Bratina Borut & Tominc Polona, 2017. "Factors of a Successfully Implemented Compulsory Settlement," Naše gospodarstvo/Our economy, Sciendo, vol. 63(1), pages 14-26, March.
    8. Tumer-Alkan, G., 2008. "Essays on banking," Other publications TiSEM 8d5ec521-4702-4e75-bc79-a, Tilburg University, School of Economics and Management.

    More about this item

    Keywords

    Bank lending; Distress; Workout; Coordination risk;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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