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Corporate distress, troubled debt restructurings and equity stripping: Analyzing corporate debt restructurings in India

Saibal Ghosh (Qatar Central Bank, Doha, Qatar)

South Asian Journal of Business Studies

ISSN: 2398-628X

Article publication date: 9 November 2018

Issue publication date: 12 April 2019




The focus on excessive corporate leverage as a key factor influencing bank loan delinquency has come into sharp focus in recent times. However, not much analysis has been undertaken on the factors driving corporate distress in emerging economies. Focusing on India as a case study, the purpose of this paper is to investigate the impact of a particular category of corporate debt restructuring (CDR) proposed by the Indian central bank over the last decade in leading an attempt to address bank loan delinquencies, the authors assess the factors influencing the quantum of restructured debt at the corporate level over the time period 2003–2012.


Besides univariate analysis, the authors use logit regression techniques to analyze the factors driving CDR outcomes in India.


The results suggest that firms that successfully exit the debt restructuring process are more profitable and less levered and spend a longer time in such restructuring. Little net equity enters these restructured firms, while there is some evidence of equity stripping, particularly in firms with greater promoter control.


To the best of our knowledge, this is one of the early studies that employ micro-level data to make a comprehensive assessment of the factors driving CDR for a leading emerging economy.



Earlier versions of the paper were presented at the economics seminar at the Reserve Bank of India and IGIDR Money and Finance Conference in December 2016. The author would like to thank, without implicating, two anonymous referees for the incisive comments on an earlier draft and to the seminar participants including Susan Thomas, Rajendra Vaidya and especially N.R. Prabhala for useful suggestions. The content reflects personal views and the author retains responsibility for any errors and omissions.


Ghosh, S. (2019), "Corporate distress, troubled debt restructurings and equity stripping: Analyzing corporate debt restructurings in India", South Asian Journal of Business Studies, Vol. 8 No. 1, pp. 105-126.



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