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Bank relationships and the likelihood of filing for reorganization

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  • Huang, Jiang-Chuan
  • Huang, Chin-Sheng
  • You, Chun-Fan

Abstract

This paper examines the effects of bank relationships on the likelihood and duration of the decision to file for reorganization for a sample of Taiwanese firms in default. We find that bank relationships significantly influence the likelihood and duration of a firm's decision on filing for reorganization. Firms with strong bank relationships exhibit significantly decreased likelihood of filing for reorganization and increased length of time needed for making the decision. The findings suggest that in a bank-oriented financial system where banks are the dominant providers of capital, bank relationships better enhance informational advantages for banks and reduce coordination problems among banks, which limits firm filings for costly reorganizations.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:reveco:v:35:y:2015:i:c:p:278-291
    DOI: 10.1016/j.iref.2014.10.007
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    5. Nicolae Stef, 2023. "Bankruptcy voting process and corporate reorganization," Bulletin of Economic Research, Wiley Blackwell, vol. 75(2), pages 508-524, April.

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    More about this item

    Keywords

    Bank relationship; Reorganization; Financial distress; Duration analysis;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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