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Multiple Lenders and Corporate Distress: Evidence on Debt Restructuring

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  • Krahnen, Jan-Pieter
  • Brunner, Antje

Abstract

In the recent theoretical literature on lending risk, the common pool problem in multi-bank relationships has been analysed extensively. In this Paper we address this topic empirically, relying on a unique panel dataset that includes detailed credit-fie information on distressed lending relationships in Germany. In particular, it includes information on bank pools: a legal institution aimed at coordinating lender interests in borrower distress. We find that the existence of small bank pools increases the probability of workout success and that coordination costs are positively related to pool size. We identify major determinants of pool formation, in particular the distribution of lending shares among banks, the number of banks, and the severity of the distress shock to the borrower.

Suggested Citation

  • Krahnen, Jan-Pieter & Brunner, Antje, 2004. "Multiple Lenders and Corporate Distress: Evidence on Debt Restructuring," CEPR Discussion Papers 4287, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4287
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    More about this item

    Keywords

    Bank lending; Bank pool; Distress; Reorganization; Coordination risk; Bankruptcy;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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