Bank relationships and the likelihood of filing for reorganization

Bankruptcy voting process and corporate reorganization

“…The expected mean difference in the weight of reorganization between insolvency systems with and without a voting right granted to secured creditors is about 13.19 points ceteris paribus. However, such result confirms not only the results of Table 3, but also the findings of some previous studies that examined how the secured debt impacts the reorganization likelihood (Fisher & Martel, 1995;Huang et al, 2015;Jostarndt & Sautner, 2010)). In this puzzle, the analysis of Fisher and Martel (1995) over a sample of 338 reorganization files from Canada reveals that unsecured creditors vote more often for reorganization plans with high rates of secured debt.…”

“…Previous studies confirmed that well‐secured creditors tend to oppose reorganization causing excess liquidation of viable firms (Ayotte & Morrison, 2009; Bergström et al., 2002; Blazy & Chopard, 2012). Other researchers provided evidence that more secured debt can facilitate firm's restructuring (Davydenko & Franks, 2008; Fisher & Martel, 1995; Huang et al., 2015; Jostarndt & Sautner, 2010). Unlike those studies that resided on the amount of secured debt and collateral value, we focus on the voting right of secured creditors as a legal measure of their participation in the reorganization approval process.…”

Corporate governance and financial distress: A review of the theoretical and empirical literature

“…This proposition was not supported and contrary to agency theory which posits that firms with managerial ownership file for bankruptcy in the later stages of FD. The follow-up studies examined the effects of bank-relationship (Huang et al, 2015), board independence, turnover, and ownership concentration (Lajili & Zéghal, 2010) but did not account for managerial ownership in filing decisions. 4.…”

“…This proposition was not supported and contrary to agency theory which posits that firms with managerial ownership file for bankruptcy in the later stages of FD. The follow‐up studies examined the effects of bank‐relationship (Huang et al, 2015), board independence, turnover, and ownership concentration (Lajili & Zéghal, 2010) but did not account for managerial ownership in filing decisions. Darrat et al (2014) argue that the relationship between board size/board independence and FD depends on firm complexity and specialist knowledge. Although further investigation is necessary, subsequent studies missed these extenuating variables. Appiah and Chizema (2016) employ data from UK companies by proposing that board quality moderates the association between nomination committees and bankruptcy.…”

Political Connections, Debt Restructuring, and Enterprise Investment: Evidence from China

“…In addition to studying debt restructuring from the perspective of enterprise's assets and debt characteristics, scholars also pay attention to bank-enterprise relationship, lender type, renegotiation cost, trade credit, and so on. Huang et al [7] take default enterprises as a research object and find that the bank-enterprise relationship brings strong information advantages to banks in the financial system dominated by banks, which enhances the coordination between banks and reduces information asymmetry as well as debt coordination problems and thus plays restrictive function in costly restructuring applications. Demiroglu and James [8] indicate that bank loans are easier to restructure out of court than loans from institutional lenders.…”