How do banks resolve firms' financial distress? Evidence from Japan

Naohisa Goto, Konari Uchida

研究成果: Contribution to journalArticle査読

4 被引用数 (Scopus)

抄録

The main purpose of this paper is to investigate how banks resolve firms' financial distress in Japan. Our results show that distressed firms that have more unsecured bank debt are more likely to restructure debt successfully out of court. Second, private debt restructuring is conducted during the year in which a financially distressed firm would be compelled to report negative net worth because of substantial accounting losses if no debt restructuring plans were implemented. Third, firms that are already in a negative net worth situation are more likely to receive debt forgiveness and/or debt-for-equity swaps. Finally, both the 1-year-lagged total liabilities-to-assets ratio and accounting losses are positively related to the private workout level. These results suggest that banks resolve firms' financial distress in shareholders' and creditors' interests. We argue that, along with bankruptcy laws, the stock exchange rules and the fact that banks are allowed to hold shares in these firms affect the resolution of firms' financial distress.

本文言語英語
ページ(範囲)455-478
ページ数24
ジャーナルReview of Quantitative Finance and Accounting
38
4
DOI
出版ステータス出版済み - 5 2012

All Science Journal Classification (ASJC) codes

  • 会計
  • ビジネス、管理および会計(全般)
  • 財務

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