Private Debt Renegotiation and Financial Institutions’ Network

We study the influence of financial institutions’ network on private debt renegotiation outside of distress. Lenders with a network-central position have access to superior private information, are more experienced and trustworthy and have a greater reputational capital. Using a large sample of more than 10.000 loans issued in 25 European countries we find that network-central lenders have a significant influence on the renegotiation process. Such lenders increase the likelihood of renegotiation, the number of renegotiation rounds, and the number of amendments to the loan agreement. Our findings survive multiple robustness checks and confirm that access to superior information, greater experience, reputation, and trust encourages private debt renegotiation.