Why do banks remain passive? In a model of bank-firm relationship we study the trade-off a bank faces when having … defaulting firms declared bankrupt. First, the bank receives a payoff if a firm is liquidated. Second, it provides information … about a firm's type to its competitors. Thereby, asymmetric information between banks is reduced and bank competition …

incentive to participate in firm restructuring. We test for the existence of empty creditors by employing an exogenous change to … of empty creditors is removed. This effect increases in the average CDS hedge position of a firm's creditors and in the …Firms with credit-default swaps (CDS) traded on their debt may face "empty creditors" as hedged creditors have less …