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What happens after corporate default? Stylized facts on access to credit

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  • Bonfim, Diana
  • Dias, Daniel A.
  • Richmond, Christine

Abstract

In this paper, we investigate what happens to firms after they default on their bank loans. We approach this question by establishing a set of stylized facts concerning the evolution of corporate default and its resolution, focusing on access to credit after default. Using a unique dataset from Portugal, we observe that half of the corporate default episodes last 5 quarters. Most firms continue to have access to credit immediately after resolving default, though only a minority has access to new loans. Firms have more difficulties in regaining access to credit if they are small, if their default was long and severe, if they borrow from only one bank or if they default with their main lender. Further, half of the defaulting firms record another default in the future. We observe that firms with repeated defaults are, on average, smaller and experience longer and more severe defaults.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 36 (2012)
Issue (Month): 7 ()
Pages: 2007-2025

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Handle: RePEc:eee:jbfina:v:36:y:2012:i:7:p:2007-2025

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Web page: http://www.elsevier.com/locate/jbf

Related research

Keywords: Loan default; Firm access to credit; Duration analysis;

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References

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Cited by:
  1. Han, Chulwoo & Jang, Youngmin, 2013. "Effects of debt collection practices on loss given default," Journal of Banking & Finance, Elsevier, vol. 37(1), pages 21-31.
  2. Vanda Almeida & Gabriela Lopes de Castro & Ricardo Mourinho Félix & Paulo Júlio & José R. Maria, 2013. "Inside PESSOA - A Detailed Description of the Model," Working Papers w201316, Banco de Portugal, Economics and Research Department.

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