Reorganisation resolutions and bank lending relationships in Taiwan

This paper investigates the impact of three different types of final resolutions of a reorganisation plan - reorganisation ratification, out-of-court settlement, and filing dismissal - on the filer's lead lending bank (LLB), on which earlier research is completely silent. Results reveal that LLBs have the largest (least) negative stock returns in response to the announcement of filing dismissal (reorganisation ratification). Moreover, this paper is the first to explore the extent to which the loan-, bank-, and borrower-level variables lead to a predictable valuation effect for the filer's LLB. In addition to contributing to the literature on bank-borrower relationships, this study proposes an innovative application by providing an empirical exposition of the receiver operating characteristic curve analysis and, thus, demonstrates the models' performance in reliability and robustness.