TY - JOUR
T1 - Inter-firm linkages and the wealth effects of financial distress along the supply chain
AU - Hertzel, Michael G.
AU - Li, Zhi
AU - Officer, Micah S.
AU - Rodgers, Kimberly J.
N1 - Funding Information:
We would like to thank Ed Altman, Harry DeAngelo, Linda DeAngelo, Kose John, Michael Lemmon, Wayne Mikkelson, Sergey Sanzhar, Rene Stulz, an anonymous referee, and seminar participants at Baruch College, the College of William and Mary, the Universities of Arizona, Georgia, and Southern California, and the 2006 Conference on Empirical Research in Corporate Finance at the University of Oregon for helpful comments and suggestions. Hertzel gratefully acknowledges the financial support of the Dean's Council of 100 at Arizona State University. Part of this research was completed while Rodgers was on the faculty at the Stern School of Business at New York University. We also thank Ana Balcarcel, John Robinson, and Swami Kalpathy for research assistance.
Copyright:
Copyright 2008 Elsevier B.V., All rights reserved.
PY - 2008/2
Y1 - 2008/2
N2 - Extant research examines the extent to which bankruptcy has intra-industry valuation consequences. This study broadens the investigation by examining the wealth effects of distress and bankruptcy filing for suppliers and customers of filing firms. On average, important wealth effects occur prior to and at bankruptcy filings and extend beyond industry competitors along the supply chain. Specifically, distress related to bankruptcy filings is associated with negative and significant stock price effects for suppliers. Supplier wealth effects are more negative when intra-industry contagion is more severe. We also investigate the importance of industry structure, specialized product nature, and leverage on supply chain effects.
AB - Extant research examines the extent to which bankruptcy has intra-industry valuation consequences. This study broadens the investigation by examining the wealth effects of distress and bankruptcy filing for suppliers and customers of filing firms. On average, important wealth effects occur prior to and at bankruptcy filings and extend beyond industry competitors along the supply chain. Specifically, distress related to bankruptcy filings is associated with negative and significant stock price effects for suppliers. Supplier wealth effects are more negative when intra-industry contagion is more severe. We also investigate the importance of industry structure, specialized product nature, and leverage on supply chain effects.
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U2 - 10.1016/j.jfineco.2007.01.005
DO - 10.1016/j.jfineco.2007.01.005
M3 - Article
AN - SCOPUS:38149072329
SN - 0304-405X
VL - 87
SP - 374
EP - 387
JO - Journal of Financial Economics
JF - Journal of Financial Economics
IS - 2
ER -