Proceedings of the 14th International Conference on New Ideas in Management, Economics, and Accounting
Year: 2025
DOI:
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Impact of Distance to Default on Bank Loan Relationships: Evidence from Indian Firms
Sandeep Kumar, Jagriti Srivastava
ABSTRACT:
This study empirically investigates the relationship between the default risk of the firms and their number of bank loans in emerging economies context. In the study, we use distance to default (DTD), which measures how far a limited liability firm is from default, and the number of bank loans to measure multiple bank relationships. We find a negative relationship between the number of bank loans and the firms’ DTD. Our findings reveal that financially healthier firms try to maintain fewer banking relationships to get the benefits of relationship lending in the long run.
keywords: distance to default, bank relationship, risk, financial health, emerging economies