LAUSR

While the literature on debt restructuring usually assumes that banks behave uniformly towards distressed firms, we demonstrate that banks follow different strategies when they decide whether to take part in the workout process or not. Using a survey of Italian banks, we link this heterogeneity to banks’ internal organization and lending technologies (transactional versus relationship lending). The probability of debt restructuring is higher when the bank is geographically closer to the borrowing firm, relies more on soft information than on credit scoring (except when credit scoring is used for monitoring purposes) or adopts a decentralized structure.