Exposure to superstar firms and financial distress

Stephanie F. Cheng (), Dushyantkumar Vyas (), Regina Wittenberg-Moerman () and Wuyang Zhao ()
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Stephanie F. Cheng: Tulane University
Dushyantkumar Vyas: University of Toronto
Regina Wittenberg-Moerman: Kellogg School of Management, Northwestern University
Wuyang Zhao: McGill University

Review of Accounting Studies, 2025, vol. 30, issue 2, No 9, 1355-1396

Abstract: Abstract A few highly successful firms (“superstar firms”) have captured large market shares and earned massive profits in recent decades. We examine whether superstar firms are associated with a greater likelihood of financial distress for firms exposed to them in product markets. Building on recent research, we identify superstars as firms with the highest markups in the industry and whose industry markup share increases over time. We then measure, with product similarity scores, a firm’s overall product market exposure to superstars. We document that firms with greater exposure are more likely to file for bankruptcy. We examine why superstar exposure is associated with bankruptcy and show that firms with the greater superstar exposure exhibit weaker financial performance and greater riskiness. Furthermore, we show that the association between superstar exposure and the likelihood of bankruptcy strengthens when superstars have greater market power.

Keywords: Superstar Firms; Financial Distress; Bankruptcy; Financial Performance; Innovation; Product Market Exposure (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11142-024-09857-1

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