What drives the dynamics of bank debt renegotiation in Europe? A survival analysis approach
AbstractDebt 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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Bibliographic InfoPaper provided by Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg (France) in its series Working Papers of LaRGE Research Center with number 2014-01.
Date of creation: 2014
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renegotiation process; bank loans; multiple failure-time data; Cox model; Europe.;
Find related papers by 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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