What happens after corporate default? Stylized facts on access to credit
In this paper, we investigate what happens to firms after they default on their bank loans. We approach this question by establishing a set of stylized facts concerning the evolution of corporate default and its resolution, focusing on access to credit after default. Using a unique dataset from Portugal, we observe that half of the corporate default episodes last 5 quarters. Most firms continue to have access to credit immediately after resolving default, though only a minority has access to new loans. Firms have more difficulties in regaining access to credit if they are small, if their default was long and severe, if they borrow from only one bank or if they default with their main lender. Further, half of the defaulting firms record another default in the future. We observe that firms with repeated defaults are, on average, smaller and experience longer and more severe defaults.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mata, Jose & Portugal, Pedro, 1994. "Life Duration of New Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 227-245, September.
- Pagano, Marco & Jappelli, Tullio, 1993.
" Information Sharing in Credit Markets,"
Journal of Finance,
American Finance Association, vol. 48(5), pages 1693-1718, December.
- Jappelli, Tullio & Pagano, Marco, 1991. "Information Sharing in Credit Markets," CEPR Discussion Papers 579, C.E.P.R. Discussion Papers.
- Bandopadhyaya, Arindam, 1994. "An Estimation of the Hazard Rate of Firms under Chapter 11 Protection," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 346-350, May.
- Michael J. Alderson & Brian L. Betker, 1999. "Assessing Postbankruptcy Performance: An Analysis of Reorganized Firms' Cash Flows," Financial Management, Financial Management Association, vol. 28(2), Summer.
- Hotchkiss, Edith Shwalb, 1995. " Postbankruptcy Performance and Management Turnover," Journal of Finance, American Finance Association, vol. 50(1), pages 3-21, March.
- Platt, Harlan D. & Platt, Marjorie B., 1991. "A note on the use of industry-relative ratios in bankruptcy prediction," Journal of Banking & Finance, Elsevier, vol. 15(6), pages 1183-1194, December.
- Elsas, Ralf & Krahnen, Jan Pieter, 1998. "Is relationship lending special? Evidence from credit-file data in Germany," Journal of Banking & Finance, Elsevier, vol. 22(10-11), pages 1283-1316, October.
- Elsas, Ralf & Krahnen, Jan Pieter, 1998. "Is relationship lending special? Evidence from credit-file data in Germany," CFS Working Paper Series 1998/05, Center for Financial Studies (CFS).
- Ethan Cohen-Cole & Burcu Duygan-Bump & Judit Montoriol-Garriga, 2009. "Forgive and forget: who gets credit after bankruptcy and why?," Risk and Policy Analysis Unit Working Paper QAU09-2, Federal Reserve Bank of Boston.
- António R. Antunes, 2005. "Analysis of delinquent firms using multi-state transitions," Working Papers w200505, Banco de Portugal, Economics and Research Department.
- Stijn Claessens & Leora F. Klapper, 2005. "Bankruptcy around the World: Explanations of Its Relative Use," American Law and Economics Review, Oxford University Press, vol. 7(1), pages 253-283.
- Claessens, Stijn & Klapper, Leora F., 2002. "Bankruptcy around the World: Explanations of its Relative Use," CEI Working Paper Series 2002-17, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
- Claessens, Stijn & Klapper, Leora F., 2002. "Bankruptcy around the world - explanations of its relative use," Policy Research Working Paper Series 2865, The World Bank.
- JosÈ Mata & Pedro Portugal, 2004. "Patterns of Entry, Post-Entry Growth and Survival: A Comparison Between Domestic and Foreign Owned Firms," Small Business Economics, Springer, vol. 22(3_4), pages 283-298, 04.
- José Mata & Pedro Portugal, 2002. "Patterns of Entry, Post-Entry Growth and Survival: A Comparison Between Domestic and Foreign Owned Firms," Working Papers w200204, Banco de Portugal, Economics and Research Department.
- Bastos, João A., 2010. "Forecasting bank loans loss-given-default," Journal of Banking & Finance, Elsevier, vol. 34(10), pages 2510-2517, October.
- Joao A. Bastos, 2009. "Forecasting bank loans loss-given-default," CEMAPRE Working Papers 0901, Centre for Applied Mathematics and Economics (CEMAPRE), School of Economics and Management (ISEG), Technical University of Lisbon.
- Andrew Haughwout & Ebiere Okah & Joseph Tracy, 2016. "Second Chances: Subprime Mortgage Modification and Redefault," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(4), pages 771-793, 06.
- Andrew F. Haughwout & Ebiere Okah & Joseph Tracy, 2009. "Second chances: subprime mortgage modification and re-default," Staff Reports 417, Federal Reserve Bank of New York.
- Adelino, Manuel & Gerardi, Kristopher & Willen, Paul S., 2013. "Why don't Lenders renegotiate more home mortgages? Redefaults, self-cures and securitization," Journal of Monetary Economics, Elsevier, vol. 60(7), pages 835-853.
- Manuel Adelino & Kristopher Gerardi & Paul S. Willen, 2009. "Why Don't Lenders Renegotiate More Home Mortgages? Redefaults, Self-Cures and Securitization," NBER Working Papers 15159, National Bureau of Economic Research, Inc.
- Manuel Adelino & Kristopher S. Gerardi & Paul S. Willen, 2009. "Why don't lenders renegotiate more home mortgages? redefaults, self-cures, and securitization," FRB Atlanta Working Paper 2009-17, Federal Reserve Bank of Atlanta.
- Manuel Adelino & Kristopher S. Gerardi & Paul S. Willen, 2009. "Why don't lenders renegotiate more home mortgages?: redefaults, self-cures, and securitization," Public Policy Discussion Paper 09-4, Federal Reserve Bank of Boston.
- Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
- Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 401-419, June.
- Acharya, Viral V. & Bharath, Sreedhar T. & Srinivasan, Anand, 2007. "Does industry-wide distress affect defaulted firms? Evidence from creditor recoveries," Journal of Financial Economics, Elsevier, vol. 85(3), pages 787-821, September.
- Edward R. Morrison, 2007. "Bankruptcy Decision Making: An Empirical Study of Continuation Bias in Small-Business Bankruptcies," Journal of Law and Economics, University of Chicago Press, vol. 50, pages 381-419.
- Franks, Julian R & Torous, Walter N, 1989. " An Empirical Investigation of U.S. Firms in Reorganization," Journal of Finance, American Finance Association, vol. 44(3), pages 747-769, July.
- Song Han & Geng Li, 2011. "Household Borrowing after Personal Bankruptcy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 491-517, 03.
- Song Han & Geng Li, 2009. "Household borrowing after personal bankruptcy," Finance and Economics Discussion Series 2009-17, Board of Governors of the Federal Reserve System (U.S.).
- Hotchkiss, Edith S. & Mooradian, Robert M., 1997. "Vulture investors and the market for control of distressed firms," Journal of Financial Economics, Elsevier, vol. 43(3), pages 401-432, March.
- Denis, Diane K. & Rodgers, Kimberly J., 2007. "Chapter 11: Duration, Outcome, and Post-Reorganization Performance," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 42(01), pages 101-118, March.
- Amanda Carmignani & Massimo Omiccioli, 2007. "Costs and benefits of creditor concentration: An empirical approach," Temi di discussione (Economic working papers) 645, Bank of Italy, Economic Research and International Relations Area.
- Bruche, Max & González-Aguado, Carlos, 2010. "Recovery rates, default probabilities, and the credit cycle," Journal of Banking & Finance, Elsevier, vol. 34(4), pages 754-764, April.
- Carlos González-Aguado & Max Bruche, 2006. "Recovery Rates, Default Probabilities and the Credit Cycle," FMG Discussion Papers dp572, Financial Markets Group.
- Max Bruche & Carlos Gonzalez-Aguado, 2006. "Recovery rates, default probabilities and the credit cycle," LSE Research Online Documents on Economics 24524, London School of Economics and Political Science, LSE Library.
- Edward I. Altman & Brooks Brady & Andrea Resti & Andrea Sironi, 2005. "The Link between Default and Recovery Rates: Theory, Empirical Evidence, and Implications," The Journal of Business, University of Chicago Press, vol. 78(6), pages 2203-2228, November.
- Thorburn, Karin S., 2000. "Bankruptcy auctions: costs, debt recovery, and firm survival," Journal of Financial Economics, Elsevier, vol. 58(3), pages 337-368, December.
- Julian Franks & Oren Sussman, 2005. "Financial Distress and Bank Restructuring of Small to Medium Size UK Companies," Review of Finance, Springer, vol. 9(1), pages 65-96, 03.
- Jean Helwege, 1999. "How Long Do Junk Bonds Spend in Default?," Journal of Finance, American Finance Association, vol. 54(1), pages 341-357, 02.
- David T. Brown & Brian A. Ciochetti & Timothy J. Riddiough, 2006. "Theory and Evidence on the Resolution of Financial Distress," Review of Financial Studies, Society for Financial Studies, vol. 19(4), pages 1357-1397.
- Sergei A. Davydenko & Julian R. Franks, 2008. "Do Bankruptcy Codes Matter? A Study of Defaults in France, Germany, and the U.K," Journal of Finance, American Finance Association, vol. 63(2), pages 565-608, 04.
- Dermine, J. & de Carvalho, C. Neto, 2006. "Bank loan losses-given-default: A case study," Journal of Banking & Finance, Elsevier, vol. 30(4), pages 1219-1243, April. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:jbfina:v:36:y:2012:i:7:p:2007-2025. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.