The Agglomeration of Bankruptcy

Efraim Benmelech, Nittai Bergman, Anna Milanez and Vladimir Mukharlyamov

No 20254, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper identifies a new channel through which bankrupt firms impose negative externalities on non-bankrupt peers. The bankruptcy and liquidation of a retail chain weakens the economies of agglomeration in any given local area, reducing the attractiveness of retail centers for remaining stores leading to contagion of financial distress. We find that companies 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 non-bankrupt peers is higher when the affected stores are smaller and are operated by firms with poor financial health.

JEL-codes: G33 G34 R12 R32 R33 (search for similar items in EconPapers)
Date: 2014-06
New Economics Papers: this item is included in nep-geo and nep-ure
Note: AP CF EFG IO LE PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Published as Efraim Benmelech & Nittai Bergman & Anna Milanez & Vladimir Mukharlyamov, 2019. "The Agglomeration of Bankruptcy," The Review of Financial Studies, vol 32(7), pages 2541-2586.

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Journal Article: The Agglomeration of Bankruptcy (2019)
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