Debt restructuring with multiple bank relationships

Arbeitspapier

When the debt of firms in distress is dispersed, a restructuring agreement is difficult to reach because of free riding. We develop a repeated game in which banks come across each other frequently, allowing them to threaten a punishment in case of free riding. As the number of lending banks grows, the chance of meeting again a bank and of being punished for free riding increases, improving the likelihood of cooperation. Looking at Italian firms in distress, we find that the restructuring probability increases with the number of banks up to a threshold - three banks - beyond which coordination problems prevail.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 77

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Bankruptcy; Liquidation
• Subject: banks ; debt restructuring ; number of creditors

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Baglioni, Angelo ; Colombo, Luca ; Rossi, Paola
• Event: Veröffentlichung
• (who): Università Cattolica del Sacro Cuore, Dipartimento di Economia e Finanza (DISCE)
• (where): Milano
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/202851
• Last update: 10.03.2025, 11:42 AM CET