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Creditor Rights, Bank-Borrower Relationships and Bank Power

Author

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  • Marco Ghitti

    (Department of Economics and Management, University of Padua, 35123 Padova, Italy)

  • Florencio Lopez-de-Silanes

    (SKEMA Business School – Université Côte d’Azur, 06902 Sophia Antipolis, France; and NBER, Cambridge, Massachusetts 02138)

  • Rafael Matta

    (SKEMA Business School – Université Côte d’Azur, 06902 Sophia Antipolis, France)

Abstract

We study how relationship lending affects the transmission of bankruptcy reforms on credit terms and bank enforcement mechanisms, using a unique database containing the universe of credits of a large Italian bank. Lower creditor rights lead the bank to reduce expected recovery rates, worsen credit terms, and tighten bank enforcement actions. Bank-borrower power dampens the terms’ impact at the cost of tougher borrower renegotiations. Older and more credit-dependent borrowers receive less unfavorable terms but see larger increases in credit suspensions and legal actions. Results suggest that policies curbing credit enforcement weaken the role of bank power in dampening economic shocks.

Suggested Citation

  • Marco Ghitti & Florencio Lopez-de-Silanes & Rafael Matta, 2026. "Creditor Rights, Bank-Borrower Relationships and Bank Power," Management Science, INFORMS, vol. 72(6), pages 5248-5273, June.
    • Handle: RePEc:inm:ormnsc:v:72:y:2026:i:6:p:5248-5273
    DOI: 10.1287/mnsc.2024.05949
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