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Debt Renegotiations Outside Distress

Journal
Review of Finance
Series
School of Finance Working Paper Series
ISSN
1572-3097
Type
journal article
Date Issued
2022
Author(s)
Arnold, Marc  
Westermann, Ramona
DOI
10.1093/rof/rfac059
Abstract
This paper develops a model to explore the implications of non-distressed debt renegotiation on debt prices and corporate policies. The model incorporates the empirical observation that creditors can influence firms also outside corporate distress through debt covenant renegotiation and not only in distress. We find that considering both distressed and non-distressed creditor interventions is key to investigating how creditor governance affects firms. The model explains cross-sectional patterns of control premiums and credit spreads that traditional debt renegotiation models do not capture. We also derive novel implications for the impact of firm characteristics associated with renegotiation on debt prices and corporate policies.
Language
English
Keywords
Debt Renegotiation
Creditor Governance
Debt Pricing
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Oxford University Press
Publisher place
St. Gallen
Number
2015/14
Start page
1
End page
46
Pages
46
URL
https://www.alexandria.unisg.ch/handle/20.500.14171/109155
Subject(s)

finance

Division(s)

s/bf - Swiss Institut...

ACA - Institute of Ac...

Contact Email Address
marc.arnold@unisg.ch
Eprints ID
243246
File(s)
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Thumbnail Image

restricted

Name

rfac059.pdf

Size

693.72 KB

Format

Adobe PDF

Checksum (MD5)

3741b387bad7690059606ab2a8814913

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