EconPapers    
Economics at your fingertips  
 

Bankruptcy spillovers

Shai Bernstein, Emanuele Colonnelli, Xavier Giroud and Benjamin Iverson

Journal of Financial Economics, 2019, vol. 133, issue 3, 608-633

Abstract: How do different bankruptcy approaches affect the local economy? Using US Census microdata, we explore the spillover effects of reorganization and liquidation on geographically proximate firms. We exploit the random assignment of bankruptcy judges as a source of exogenous variation in the probability of liquidation. We find that employment declines substantially in the immediate neighborhood of the liquidated establishments, relative to reorganized establishments. The spillover effects are highly localized and concentrate in nontradable and service sectors, consistent with a reduction in local consumer traffic and a decline in knowledge spillovers between firms. The evidence highlights the externalities that bankruptcy design can impose on nonbankrupt firms.

Keywords: Bankruptcy; Agglomeration; Local economy (search for similar items in EconPapers)
JEL-codes: G33 G38 D62 L26 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X18302733
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:133:y:2019:i:3:p:608-633

DOI: 10.1016/j.jfineco.2018.09.010

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Haili He ().

 
Page updated 2020-05-02
Handle: RePEc:eee:jfinec:v:133:y:2019:i:3:p:608-633