Bank Relationships and Firm Private Debt Restructuring

• Main Authors: Jiang-Chuan Huang, 黃江川
• Other Authors: Chin-Sheng Huang
• Format: Others
• Language: en_US
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/91203343513261343311

博士 === 雲林科技大學 === 管理研究所博士班 === 97 === This study seeks to examine the direct benefit of bank relationships for a financially distressed firm by assessing its influence on the success and duration of firm private debt restructuring. Due to the data collecting impediments, this study particularly adopts the Taiwan Corporate Credit Risk Index (TCRI) to present a well-defined beginning and ending date of firm debt-restructuring, which helps us identify the success or failure of private debt restructuring. Moreover, in this study three proxies for completely measuring the degree of bank relationships are employed to ascertain the differential impacts upon success and duration of private debt restructuring brought forth from different measures. This study finds that indeed, relatively a financially distressed firm with a stronger bank relationship has a greater probability to successfully restructure its debt through private renegotiation. Accordingly, an analysis of credit rating recovery provides complementary evidence on the factors of successful debt restructuring. A duration analysis of the length of time needed for a debt restructuring to be completed shows that a financially distressed firm with a stronger bank relationship has a shorter length of time needed to successfully restructure its debt through private renegotiation. Thus, this study concludes that in a bank dominated financial system like Taiwan’s where firms are heavily bank-dependent, the bank-firm relationship is of crucial importance to the success and duration of financially distressed firms in private debt restructuring.