The Agglomeration of Bankruptcy

Efraim Benmelech, Nittai K. Bergman, Anna Milanez, Vladimir Mukharlyamov

Research output: Working paper

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.
Original languageEnglish (US)
PublisherNational Bureau of Economic Research (NBER)
DOIs
StatePublished - 2014

Publication series

Name
No.20254

Fingerprint

Bankruptcy
Agglomeration
Peers
Contagion
Retailers
Retail
Liquidation
Retail chain
Negative externalities
Externalities
Financial distress
Financial health
Attractiveness

Cite this

Benmelech, E., Bergman, N. K., Milanez, A., & Mukharlyamov, V. (2014). The Agglomeration of Bankruptcy. National Bureau of Economic Research (NBER). https://doi.org/10.3386/w20254
Benmelech, Efraim ; Bergman, Nittai K. ; Milanez, Anna ; Mukharlyamov, Vladimir. / The Agglomeration of Bankruptcy. National Bureau of Economic Research (NBER), 2014.
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Benmelech, E, Bergman, NK, Milanez, A & Mukharlyamov, V 2014 'The Agglomeration of Bankruptcy' National Bureau of Economic Research (NBER). https://doi.org/10.3386/w20254

The Agglomeration of Bankruptcy. / Benmelech, Efraim; Bergman, Nittai K.; Milanez, Anna; Mukharlyamov, Vladimir.

National Bureau of Economic Research (NBER), 2014.

Research output: Working paper

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Benmelech E, Bergman NK, Milanez A, Mukharlyamov V. The Agglomeration of Bankruptcy. National Bureau of Economic Research (NBER). 2014. https://doi.org/10.3386/w20254