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Debt Restructuring and the Role of Banks’ Organizational Structure and Lending Technologies

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  • Giacinto Micucci

    (Bank of Italy, Economic Research Unit - Ancona)

  • Paola Rossi

    (Bank of Italy, Economic Research Division - Milano)

Abstract

While the literature on debt restructuring usually assumes that banks behave uniformly towards distressed firms, we demonstrate that banks follow different strategies when they decide whether to take part in the workout process or not. Using a survey of Italian banks, we link this heterogeneity to banks’ internal organization and lending technologies (transactional versus relationship lending). The probability of debt restructuring is higher when the bank is geographically closer to the borrowing firm, relies more on soft information than on credit scoring (except when credit scoring is used for monitoring purposes) or adopts a decentralized structure.

Suggested Citation

  • Giacinto Micucci & Paola Rossi, 2017. "Debt Restructuring and the Role of Banks’ Organizational Structure and Lending Technologies," Journal of Financial Services Research, Springer;Western Finance Association, vol. 51(3), pages 339-361, June.
    • Handle: RePEc:kap:jfsres:v:51:y:2017:i:3:d:10.1007_s10693-016-0250-5
    DOI: 10.1007/s10693-016-0250-5
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    More about this item

    Keywords

    Financial distress; Debt restructuring; Bank organization; Lending technologies;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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