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Debt Renegotiation and the Design of Financial Contracts

Author

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  • Christophe J. Godlewski

    (LARGE - Laboratoire de Recherche en Gestion et Economie - UNISTRA - Université de Strasbourg)

Abstract

This study examines the design of financial contracts after renegotiations. It focuses on the degree of renegotiation as measured by the number of amendments to the contract. I find that the design of renegotiated financial contracts is not homogenous, although the most frequent amendments are to the loan’s amount and maturity. I show that the number of amendments increases with longer maturities. Collateral and bank reputation have the opposite effect. Creditors friendly environments with fewer renegotiation frictions increase the number of amendments. Overall, contractual, organizational, and legal features have a significant influence on the design of financial contracts after renegotiation.
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Suggested Citation

  • Christophe J. Godlewski, 2019. "Debt Renegotiation and the Design of Financial Contracts," Post-Print hal-03047757, HAL.
    • Handle: RePEc:hal:journl:hal-03047757
    DOI: 10.1007/s10693-019-00311-x
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    Cited by:

    1. Joseph, Kerron & Nguyen, Ca & Wald, John K., 2025. "Renegotiation of international loans, capital regulation, and monetary policy," Journal of Banking & Finance, Elsevier, vol. 176(C).
    2. Godlewski, Christophe J. & Sanditov, Bulat, 2024. "Bank loan renegotiation and financial institutions' network," International Review of Financial Analysis, Elsevier, vol. 95(PB).
    3. Jiang, Jinglu & Liu, Bo & Yang, Jinqiang, 2019. "The impact of debt restructuring on firm investment: Evidence from China," Economic Modelling, Elsevier, vol. 81(C), pages 325-337.
    4. Shu Feng & Chang Liu & Xiaoling Pu, 2022. "Connected Lending in Bank Lines of Credit," Journal of Financial Services Research, Springer;Western Finance Association, vol. 61(2), pages 187-216, April.
    5. Ana Lozano-Vivas & Edward Simpson Prescott, 2019. "Introduction to the Special Issue," Journal of Financial Services Research, Springer;Western Finance Association, vol. 55(2), pages 111-113, June.
    6. José Valente & Mário Augusto & José Murteira, 2022. "Bargaining power and renegotiation of small private debt contracts," Annals of Finance, Springer, vol. 18(4), pages 485-510, December.
    7. Duran, Miguel A., 2022. "The risk–return relation in the corporate loan market," The North American Journal of Economics and Finance, Elsevier, vol. 60(C).
    8. Godlewski, Christophe J., 2020. "How legal and institutional environments shape the private debt renegotiation process?," Journal of Corporate Finance, Elsevier, vol. 62(C).
    9. Christophe J. GODLEWSKI & Bulat SANDITOV, 2020. "Private debt renegotiation and financial institutions' network," Working Papers of LaRGE Research Center 2020-01, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    10. Christophe J. GODLEWSKI, 2017. "Initial conditions and the private debt renegotiation process," Working Papers of LaRGE Research Center 2017-03, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.

    More about this item

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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