The Effects of Bank Loan Renegotiation on Corporate Policies and Performance

46 Pages Posted: 28 Jan 2018

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: December 2017

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 cross-country 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.

Keywords: bank loan, renegotiation, financial policy, investment policy, performance, treatment effect

JEL Classification: G21, G32, C31, C34

Suggested Citation

Godlewski, Christophe J., The Effects of Bank Loan Renegotiation on Corporate Policies and Performance (December 2017). Available at SSRN: https://ssrn.com/abstract=3105570 or http://dx.doi.org/10.2139/ssrn.3105570

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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