It Takes Two to Tango: An Empirical Tale of Distressed Firms and Assisting Banks
University of Groningen - Faculty of Law - Department of Law and Economics
Abe De Jong
Erasmus University - Rotterdam School of Management
June 2004 8,
ERIM Report Series Reference No. ERS-2004-049-F&A
We study the restructuring process of small and medium-sized firms in financial distress. We have a unique dataset with firms in the Netherlands that are guided in their restructuring effort by banks. Part of our dataset consists of firms that successfully restructure their operations and obligations with the help of their bank. Another part consists of firms that, despite the assistance of their bank, did not succeed in reorganizing their operations and finances. Our empirical test predicts success and failure in restructuring. We find that banks guide firms in their restructuring effort and that their assistance is of crucial importance to the success of the restructuring. However, some firms do not benefit from this assistance, because firms need to be prepared to undertake radical operational changes before bank assistance is forthcoming.
Number of Pages in PDF File: 36
Keywords: bankruptcy, debt restructuring, financial distress, reorganization
JEL Classification: M, M41, G3, G21, G33, K22, K33working papers series
Date posted: September 27, 2004
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