Please use this identifier to cite or link to this item: http://hdl.handle.net/10125/70543

Long-run Performance of Debt Renegotiations: Large-Sample Evidence

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dc.contributor.author Tracy Xiang
dc.contributor.author Wei Wang
dc.contributor.author Sudipta Basu
dc.date.accessioned 2020-12-01T01:00:40Z
dc.date.available 2020-12-01T01:00:40Z
dc.date.issued 2020-08-16
dc.identifier.uri http://hdl.handle.net/10125/70543
dc.description.abstract We examine the long-run performance of over 16,000 debt renegotiations. We find that, compared with non-renegotiating firms matched on size, book-to-market, profitability, and investment, renegotiating firms deliver 13% (20%) higher stock returns over the three (five) years following the renegotiation. This renegotiation effect is strongest for waivers and for amendments to loan interest rates and financial covenants. Renegotiations lead to improvements in accounting-based performance measures including return on assets, cash flow from operations, and financial distress. Consistent with incomplete contract theory, our evidence shows that renegotiations alleviate ex-post inefficiencies in credit agreements and produce long-term gains for the borrower.
dc.subject Debt Renegotiation
dc.subject Long-Run Performance
dc.subject Incomplete Contracts
dc.subject Large Sample
dc.title Long-run Performance of Debt Renegotiations: Large-Sample Evidence
Appears in Collections: 14 Financial Accounting 7: Debt Market Research (Including Credit Ratings/Debt Contracts)


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