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Debt renegotiation and the design of financial contracts

Listed author(s):
  • Christophe J. GODLEWSKI

    ()

    (LaRGE Research Center, Université de Strasbourg)

I study the impact of bank loan renegotiation on the design of financial contracts. Debt renegotiation can be beneficial for borrowers and lenders but its impact on the design of financial contracts is less clear. However, contract design is crucial for borrower’s investment, operating and financing policies. I find that the design of renegotiated credit agreements is not homogenous. Main renegotiation packages contain amendments to loan amount and maturity. I show that secured loans with longer maturities experience broader amendments. Creditors’ friendly environment and the presence of reputable, sound, and profitable lenders have a similar effect.

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File URL: http://ifs.u-strasbg.fr/large/publications/2016/2016-03.pdf
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Paper provided by Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg in its series Working Papers of LaRGE Research Center with number 2016-03.

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Date of creation: 2016
Handle: RePEc:lar:wpaper:2016-03
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