Bankruptcy Spillovers

Shai Bernstein, Emanuele Colonnelli, Xavier Giroud and Benjamin Iverson
Additional contact information
Shai Bernstein: Stanford University
Xavier Giroud: MIT
Benjamin Iverson: Northwestern University

Research Papers from Stanford University, Graduate School of Business

Abstract: How do different bankruptcy approaches affect the local economy? Using U.S. 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 non-tradable 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 non-bankrupt firms.

Date: 2017-05
New Economics Papers: this item is included in nep-geo, nep-sbm and nep-ure
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Related works:
Journal Article: Bankruptcy spillovers (2019)
Working Paper: Bankruptcy Spillovers (2017)
Working Paper: Bankruptcy Spillovers (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:stabus:3564

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