Liquidity vs Present Value Effects in Distressed Debt Restructuring
Last registered on April 13, 2018

Pre-Trial

Trial Information
General Information
Title
Liquidity vs Present Value Effects in Distressed Debt Restructuring
RCT ID
AEARCTR-0001781
Initial registration date
April 11, 2018
Last updated
April 13, 2018 1:53 PM EDT
Location(s)

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Primary Investigator
Affiliation
Stanford
Other Primary Investigator(s)
PI Affiliation
Stanford
Additional Trial Information
Status
On going
Start date
2016-12-01
End date
2020-01-01
Secondary IDs
Abstract
We study the effect of distressed debt restructuring on consumer spending, default and welfare. We first design and implement a large scale randomized trial at a large retail bank in which we deliberately vary the interest rate, the amount of temporary payment reductions, and the maturity of restructured loans. This allows us to disentangle the effects of liquidity and present-value debt reductions on spending and defaults at various horizons. We use our empirical findings to calibrate the parameters of an intertemporal model of consumption that includes a default option. We use the model to study the optimal form of debt renegotiation, and the role of debt relief in aggregate stabilization policy.
External Link(s)
Registration Citation
Citation
Auclert, Adrien and Deniz Aydin. 2018. "Liquidity vs Present Value Effects in Distressed Debt Restructuring." AEA RCT Registry. April 13. https://www.socialscienceregistry.org/trials/1781/history/28184
Experimental Details
Interventions
Intervention(s)
We design and implement a large scale field experiment at a large European retail bank where we offer various type of debt relief to delinquent consumers. Our design varies the interest rate, the amount of temporary payment reductions, and the maturity of restructured loans. This allows us to disentangle the effects of liquidity and present-value debt reductions on spending and defaults at various
horizons.
Intervention Start Date
2017-06-15
Intervention End Date
2018-06-15
Primary Outcomes
Primary Outcomes (end points)
consumption, late payments, defaults, recovery
Primary Outcomes (explanation)
Secondary Outcomes
Secondary Outcomes (end points)
Secondary Outcomes (explanation)
Experimental Design
Experimental Design
Our design varies contract terms along three dimensions in a 2-by-2-by-2 design. We take consumer's outstanding debt balance as given, and exogenously vary interest rates, maturity and payment schedules.
Experimental Design Details
Not available
Randomization Method
STATA
Randomization Unit
individual
Was the treatment clustered?
No
Experiment Characteristics
Sample size: planned number of clusters
30,000
Sample size: planned number of observations
30,000
Sample size (or number of clusters) by treatment arms
5000 high rate, high maturity, no relief; 2500 high rate, high maturity, relief;
5000 low rate, high maturity, no relief; 2500 low rate, high maturity, relief;
5000 high rate, low maturity, no relief; 2500 high rate, low maturity, relief;
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB
INSTITUTIONAL REVIEW BOARDS (IRBs)
IRB Name
IRB Approval Date
IRB Approval Number