The Agglomeration of Bankruptcy

Efraim Benmelech, Nittai Bergman, Anna Milanez and Vladimir Mukharlyamov

The Review of Financial Studies, 2019, vol. 32, issue 7, 2541-2586

Abstract: This paper identifies a new channel through which bankrupt firms undergoing liquidation impose negative externalities on their nonbankrupt peers. The liquidation of a retail chain weakens the economies of agglomeration in any given local area, reducing the attractiveness of retail centers for remaining stores and leading to contagion of financial distress. We find that firms with greater geographic exposure to bankrupt retailers are more likely to close stores in affected areas. We further show that the effect of these externalities on nonbankrupt peers is higher when affected stores are smaller and are operated by firms in financial distress.Received December 16, 2015; editorial decision June 28, 2018 by Editor Philip Strahan.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://hdl.handle.net/10.1093/rfs/hhy114 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: The Agglomeration of Bankruptcy (2014)
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:oup:rfinst:v:32:y:2019:i:7:p:2541-2586.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Review of Financial Studies is currently edited by Itay Goldstein

More articles in The Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().