It Takes Two to Tango: An Empirical Tale of Distressed Firms and Assisting Banks

Posted: 4 May 2007

See all articles by Abe de Jong

Abe de Jong

Rotterdam School of Management, Erasmus University; Monash University

Oscar Couwenberg

University of Groningen - Faculty of Spatial Sciences

Multiple version iconThere are 2 versions of this paper

Abstract

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 assisted 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 play a role in the firms' restructuring efforts and that this assistance is of crucial importance to the success of the restructuring. We conclude that the harsh bankruptcy rules in the Netherlands support private negotiations between financially distressed firms and their banks.

Keywords: bankruptcy, debt restructuring, financial distress, reorganization

JEL Classification: G21, G33, K22, K33

Suggested Citation

de Jong, Abe and Couwenberg, Oscar, It Takes Two to Tango: An Empirical Tale of Distressed Firms and Assisting Banks. International Review of Law and Economics, Vol. 26, pp. 429-454, December 2006. Available at SSRN: https://ssrn.com/abstract=984387

Abe De Jong

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T08-25
Rotterdam, 3000 DR
Netherlands
+31 10 408 1022 (Phone)

HOME PAGE: http://https://www.rsm.nl/people/abe-de-jong/

Monash University ( email )

900 Dandenong Rd
Room H3-56
Caulfield East, Victoria 3145
Australia

HOME PAGE: http://https://research.monash.edu/en/persons/abe-de-jong

Oscar Couwenberg (Contact Author)

University of Groningen - Faculty of Spatial Sciences ( email )

P.O. Box 800
9700 AV Groningen
Netherlands
31 50 363 3907 (Phone)

HOME PAGE: http://www.rug.nl/staff/o.couwenberg/?lang=en

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