External influence on firms: An exploratory model of bank strategies

Abstract

Commercial banks, as providers of capital, influence the decisions of their client firms in decline. This article examines the strategies used by a bank while responding to financial difficulty in its clients. Five strategies are identified: managerial turnaround, restructuring, financial workout, legal, and exit. These are dependent on the causes of the problem in the firms, secured status of the loan, severity of the problem, client's cooperation, and turnaround ability of the management. The implications of the findings and directions for further research are discussed.