Bank Responses to Corporate Reorganization: Evidence from an Emerging Economy

• Published in: BAR, Brazilian administration review Vol. 16; no. 1; pp. 1 - 25A
• Main Authors: Oreng, Mariana, Saito, Richard, Silva, Vinicius A.B
• Format: Journal Article
• Language: English; Portuguese
• Published: Rio de Janeiro Associacao Nacional de Pos-Graduacao e Pesquisa em Administracao-ANPAD 2019; Associação Nacional de Pós-Graduação e Pesquisa em Administração; ANPAD - Associação Nacional de Pós-Graduação e Pesquisa em Administração; Associação Nacional de Pós-Graduação e Pesquisa em Administração (ANPAD)
• Subjects: Asymmetry; Bankruptcy; Bankruptcy laws; Bankruptcy reorganization; Banks (Finance); Bargaining; conflict between creditors; Conflicts of interest; Corporate reorganization; Corporate reorganizations; creditors’ bargain model; Debt; Debt restructuring; Debtor and creditor; Economics; Emerging markets; Financial statements; MANAGEMENT; Money; Public companies; Reorganization; Seniority; Social sciences; State laws; Studies; Brazil; United States > US; creditors’ bargain model; conflict between creditors; bankruptcy; reorganization
• ISSN: 1807-7692; 1807-7692
• DOI: 10.1590/1807-7692bar2019180053

This study analyzes a unique dataset of 125 corporate reorganization filings in Brazil from 2006 to 2016 to understand the role of bank creditor seniority in bankruptcy outcomes of small- and medium-sized companies. We find that conflict between bank creditor classes is relevant for explaining reorganization outcomes and that it occurs when organizations are in the money. Additionally, bank seniority matters more than the bank's debt share for explaining bankruptcy outcomes in creditor-oriented regimes. Finally, we find a concave relationship between favorable votes and the number of banks involved and between favorable votes and a company's age.