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The effects of bank loan renegotiation on corporate policies and performance

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  • Christophe GODLEWSKI

    () (LaRGE Research Center, Université de Strasbourg)

Abstract

I investigate the effects of bank loan renegotiation on firm’s financial and investment policies, and performances. I employ OLS and endogenous switching regime regressions using a large crosscountry sample of loans issued and amended on a long-time period. I find that bank loan renegotiation has an economically significant and causal impact on financial policy and performances. Renegotiation provides the firm with additional degrees of freedom and unlocks its economic potential, implying important effects of firm’s tangibility, growth, opportunities and cash on financial policy and performances. Bank loan renegotiation also exhibits a certification and signaling effect which can increase the effect of amendments to the credit agreement on firm’s financial policy.

Suggested Citation

  • Christophe GODLEWSKI, 2018. "The effects of bank loan renegotiation on corporate policies and performance," Working Papers of LaRGE Research Center 2018-01, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
  • Handle: RePEc:lar:wpaper:2018-01
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    References listed on IDEAS

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    More about this item

    Keywords

    bank loan; renegotiation; financial policy; investment policy; performance; treatment effect; Europe;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models

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