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Language and private debt renegotiation

Author

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  • Christophe J. GODLEWSKI

    (LaRGE Research Center, Université de Strasbourg)

Abstract

We study how language affects private debt renegotiation. We predict that stronger future time reference (FTR) languages alter the importance of renegotiation risk by lowering the perceived value of loan renegotiation. We test this hypothesis on a sample of 6.500 loans issued to European firms between 1999 and 2017. We find that the use of a stronger FTR language decreases renegotiation likelihood and the number of renegotiation rounds. These findings are robust to several FTR proxies, various specifications including loan, borrower and country level variables, and potential mitigation effects from specific loan, country, or time effects. They suggest that linguistic structure influences the renegotiation process of private debt contracts.

Suggested Citation

  • Christophe J. GODLEWSKI, 2022. "Language and private debt renegotiation," Working Papers of LaRGE Research Center 2022-02, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    • Handle: RePEc:lar:wpaper:2022-02
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    More about this item

    Keywords

    language; future tense marking; future time reference; bank loan; renegotiation.;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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