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What drives the dynamics of bank debt renegotiation in Europe? A survival analysis approach

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  • Christophe J. GODLEWSKI

    (LaRGE Research Center, Université de Strasbourg)

Abstract

Debt renegotiation matters for the borrower-lender relationship to ensure the credit agreement is regularly amended to include new information and make it more “complete”. I investigate the determinants of the dynamics of bank loan renegotiations using a sample of 1 600 amendments to private debt contracts in Europe. The median duration between loan amendments equals 1 year, although frequently renegotiated contracts are amended every 5 months. Employing a stratified Cox-type hazard model, I find that initial loan terms, banking pool features, amendments’ characteristics, and the legal environment significantly influence the duration time between renegotiations. Contract complexity, informational frictions in the borrower-lender relationship, the uncertainty of the economic environment, and the legal protection of creditors also play a major role in shaping the dynamics of bank loan renegotiation in Europe.

Suggested Citation

  • Christophe J. GODLEWSKI, 2014. "What drives the dynamics of bank debt renegotiation in Europe? A survival analysis approach," Working Papers of LaRGE Research Center 2014-01, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    • Handle: RePEc:lar:wpaper:2014-01
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    More about this item

    Keywords

    renegotiation process; bank loans; multiple failure-time data; Cox model; Europe.;
    All these keywords.

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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