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Restructuring Know How and Collateral

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  • Schäfer, Dorothea

Abstract

A close relationship often involves lenders in workouts for their distressed clients. Since restructuring activities need special expertise, banks must have previously ac- cumulated restructuring know-how. We analyze the factors which induce banks to invest in restructuring know-how and explore the relationship between restructur- ing know-how and outside collateral. We find that banks are likely to accumulate restructuring know-how if they enjoy market power or finance a large project. Out- side collateralization and restructuring know-how are substitutes. Since restructuring know-how preserves the value of the bank's inside collateral, this result indicates that empirical studies on debt securization and financial contracting need to distinguish clearly between the two types of collateral.

Suggested Citation

  • Schäfer, Dorothea, 2002. "Restructuring Know How and Collateral," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 35(4), pages 572-597.
    • Handle: RePEc:zbw:espost:127479
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    References listed on IDEAS

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    1. Doris Neuberger, 2009. "Finanzierungs- und Governance-Strukturen im Wandel: Arbeitsteilung zwischen Banken und Private Equity Fonds," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 78(1), pages 143-155.

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