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Bank relationships and the likelihood of filing for reorganization

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  • Huang, Jiang-Chuan
  • Huang, Chin-Sheng
  • You, Chun-Fan
Abstract
This paper examines the effects of bank relationships on the likelihood and duration of the decision to file for reorganization for a sample of Taiwanese firms in default. We find that bank relationships significantly influence the likelihood and duration of a firm's decision on filing for reorganization. Firms with strong bank relationships exhibit significantly decreased likelihood of filing for reorganization and increased length of time needed for making the decision. The findings suggest that in a bank-oriented financial system where banks are the dominant providers of capital, bank relationships better enhance informational advantages for banks and reduce coordination problems among banks, which limits firm filings for costly reorganizations.

Suggested Citation

  • Huang, Jiang-Chuan & Huang, Chin-Sheng & You, Chun-Fan, 2015. "Bank relationships and the likelihood of filing for reorganization," International Review of Economics & Finance, Elsevier, vol. 35(C), pages 278-291.
    • Handle: RePEc:eee:reveco:v:35:y:2015:i:c:p:278-291
    DOI: 10.1016/j.iref.2014.10.007
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    2. Jiang-Chuan Huang & Hueh-Chen Lin & Daniel Huang, 2022. "The Effect of Operating Cash Flow on the Likelihood and Duration of Survival for Marginally Distressed Firms in Taiwan," Sustainability, MDPI, vol. 14(24), pages 1-20, December.
    3. Nicolae Stef, 2023. "Bankruptcy voting process and corporate reorganization," Bulletin of Economic Research, Wiley Blackwell, vol. 75(2), pages 508-524, April.
    4. Jiang, Jinglu & Liu, Bo & Yang, Jinqiang, 2019. "The impact of debt restructuring on firm investment: Evidence from China," Economic Modelling, Elsevier, vol. 81(C), pages 325-337.
    5. Ahmad, Abd Halim, 2019. "What factors discriminate reorganized and delisted distressed firms: Evidence from Malaysia," Finance Research Letters, Elsevier, vol. 29(C), pages 50-56.
    6. Umair Bin Yousaf & Khalil Jebran & Irfan Ullah, 2024. "Corporate governance and financial distress: A review of the theoretical and empirical literature," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 1627-1679, April.

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    More about this item

    Keywords

    Bank relationship; Reorganization; Financial distress; Duration analysis;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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