Determinants of Multiple Bank Loan Renegotiations in Europe
38 Pages Posted: 19 Nov 2013
Date Written: November 18, 2013
This article provides empirical evidence on the determinants of multiple bank loan renegotiations in Europe over the last decade. I find that renegotiations differ from those in US in terms of frequency, amended terms, and first occurrence. Multiple renegotiations concern very large loans which are funded by large pools of lenders with fewer lead banks. Borrower transparency and amendment characteristics halt the number of renegotiation rounds while the credit crisis of 2008 has the opposite effect. Financial development, banking structure and creditor rights also influence the renegotiation process. Overall, the renegotiation process adapts to informational frictions in the borrower-lender relationship.
Keywords: debt renegotiation, financial contracts, bank loans, Europe
JEL Classification: G14, G20
Suggested Citation: Suggested Citation