Credit Relationships and Business Bankruptcy During the Great Depression
Mary Hansen and
No 2014-11, Working Papers from American University, Department of Economics
Credit relationships are sticky. Stickiness makes relationships beneficial for borrowers in distress, but potentially problematic for them when lenders face distress. To examine stickiness in a time of distress, we exploit a natural experiment during the Depression that generated differences in banking outcomes. Using a new dataset from Dun & Bradstreet and original bankruptcy filings, we show that greater distress increased exit by up to 16 percent. Distress did not generate more bankruptcies, but it changed the geographical distribution of creditors of bankrupt businesses. This is consistent with a contraction of business-to-business credit where there was greater distress.
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https://doi.org/10.17606/jyfm-rt92 First version, 2014 (application/pdf)
Journal Article: Credit Relationships and Business Bankruptcy during the Great Depression (2017)
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