Working Paper: CEPR ID: DP3030
Authors: Antje Brunner; Jan Pieter Krahnen
Abstract: We analyse the coordination problem in multi-creditor relationships empirically, relying on a unique panel data set that contains detailed credit-file information on distressed lending relationships in Germany, including information on creditor pools, a legal institution aiming at coordinating lender interests in borrower distress. We report three major findings. First, the existence of creditor pools increases the probability of workout success. Second, the results are consistent with coordination costs being positively related to pool size. Third, major determinants of pool formation are found to be the number of banks, the distribution of lending shares, and the severity of the distress shock.
Keywords: bank lending; coordination; risk; distress; workout
JEL Codes: D74; G21; G33; G34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Creditor pool existence (G33) | Workout success (I10) |
| Creditor pool existence (G33) | Coordination among lenders (G21) |
| Coordination among lenders (G21) | Workout success (I10) |
| Creditor pool size (E51) | Coordination costs (D23) |
| Number of banks involved (G21) | Creditor pool existence (G33) |
| Severity of distress shock (H84) | Creditor pool existence (G33) |
| Number of banks involved (G21) | Workout success (I10) |
| Severity of distress shock (H84) | Workout success (I10) |