Regulator-initiated corporate debt restructuring: Evidence from Bangladesh

Prior research reports that corporate debt restructuring can increase the stability of the participating bank by inflating the provision of restructured loans. This study evaluates how the stability of Bangladeshi commercial banks has changed following the implementation of the regulator-initiated corporate debt restructuring (RCDR) policy. Our comprehensive bank-level analysis reveals that debt restructuring has led to a reduction in non-performing loans (NPLs) and the provision of participating banks; however, these banks continue to experience lower stability after the policy period. This study provides a new and important insight into the debate on the effectiveness of debt restructuring on bank performance.