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

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  • Christophe 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.

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Paper provided by Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg in its series Working Papers of LaRGE Research Center with number 2014-01.

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Date of creation: 2014
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Handle: RePEc:lar:wpaper:2014-01

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Keywords: renegotiation process; bank loans; multiple failure-time data; Cox model; Europe.;

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