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The effects of bank relationships on firm private debt restructuring: Evidence from an emerging market

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  • Huang, Jiang-Chuan
  • Huang, Chin-Sheng
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    Abstract

    Our paper seeks to examine the direct benefit of bank relationships for a distressed borrower by assessing its influence on the success of firm private debt restructuring. We find that a distressed firm with a stronger bank relationship has a greater probability to successfully restructure its debt through private renegotiation. Accordingly, an analysis of credit rating recovery provides complementary evidence on the factors of successful debt restructuring. A duration analysis of the length of time needed for a debt restructuring to be completed is fully consistent with our documented results. We conclude that in a bank dominated financial system like Taiwan's where firms are heavily bank-dependent, the bank-firm relationship is of crucial importance to the success of financially distressed firms in private debt restructuring.

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    Bibliographic Info

    Article provided by Elsevier in its journal Research in International Business and Finance.

    Volume (Year): 25 (2011)
    Issue (Month): 1 (January)
    Pages: 113-125

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    Handle: RePEc:eee:riibaf:v:25:y:2011:i:1:p:113-125

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

    Related research

    Keywords: Bank relationship Debt restructuring Private renegotiation Financial distress;

    References

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