Debt Renegotiations Outside Distress

Marc Arnold*, Ramona Westermann

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review


This article develops a model to explore the implications of nondistressed debt renegotiation on debt prices and corporate policies. The model incorporates the empirical observation that creditors can influence firms also outside corporate distress through debt covenant renegotiation and not only in distress. We find that considering both distressed and nondistressed creditor interventions is key to investigating how creditor governance affects firms. The model explains cross-sectional patterns of control premiums and credit spreads that traditional debt renegotiation models do not capture. We also derive novel implications for the impact of firm characteristics associated with renegotiation on debt prices and corporate policies.
Original languageEnglish
JournalReview of Finance
Issue number4
Pages (from-to)1183-1228
Number of pages46
Publication statusPublished - Jul 2023

Bibliographical note

Published online: 09 September 2022.


  • Debt renegotiation
  • Creditor governance
  • Debt pricing

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