What Drives the Dynamics of Bank Loan Renegotiation in Europe?

44 Pages Posted: 2 May 2013

See all articles by Christophe J. Godlewski

Christophe J. Godlewski

University of Strasbourg - Faculty of Law and Business; EM Strasbourg Business School; LaRGE Research Center

Date Written: May 1, 2013

Abstract

I investigate the determinants of the duration between bank loan renegotiations using a sample of 1 600 amendments to private debt contracts in Europe. The median duration between loan amendments equals one year, although frequently renegotiated contracts are amended every five months. Employing a stratified Cox-type hazard model, I find that initial loan terms, banking pool features, amendments’ characteristics and legal environment significantly influence the duration time between renegotiations. Contract complexity, informational frictions in the borrower-lender relationship, uncertainty of the economic environment and legal protection of creditors play a major role in shaping the dynamics of bank loan renegotiation.

Keywords: renegotiation process, bank loans, multiple failure-time data, Cox model, Europe

JEL Classification: C41, G14, G20

Suggested Citation

Godlewski, Christophe J., What Drives the Dynamics of Bank Loan Renegotiation in Europe? (May 1, 2013). Available at SSRN: https://ssrn.com/abstract=2259124 or http://dx.doi.org/10.2139/ssrn.2259124

Christophe J. Godlewski (Contact Author)

University of Strasbourg - Faculty of Law and Business ( email )

1 place d'Athènes
Strasbourg, 67000
France

HOME PAGE: http://droit.unistra.fr/

EM Strasbourg Business School ( email )

61 Avenue de la Forêt Noire
Strasbourg, 67000
France

HOME PAGE: http://www.em-strasbourg.eu/

LaRGE Research Center ( email )

1 place d'Athènes
Strasbourg, 67000
France

HOME PAGE: http://droit.unistra.fr/

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