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http://ssrn.com/abstract=912795
 
 

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Inter-Firm Linkages and the Wealth Effects of Financial Distress Along the Supply Chain


Michael G. Hertzel


Arizona State University (ASU) - Finance Department

Micah S. Officer


Loyola Marymount University - Department of Finance and Computer Information Systems

Zhi Li


Tulane University, A.B. Freeman School of Business

Kimberly Rodgers Cornaggia


American University - Kogod School of Business


Journal of Financial Economics, Vol. 87, No. 2, pp. 374-387

Abstract:     
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.

Number of Pages in PDF File: 32

Keywords: Bankruptcy, Financial Distress, Contagion, Supply Chain

JEL Classification: G33, G32

Accepted Paper Series


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Date posted: July 10, 2006 ; Last revised: January 22, 2009

Suggested Citation

Hertzel, Michael G. and Officer, Micah S. and Li, Zhi and Cornaggia, Kimberly Rodgers, Inter-Firm Linkages and the Wealth Effects of Financial Distress Along the Supply Chain. Journal of Financial Economics, Vol. 87, No. 2, pp. 374-387. Available at SSRN: http://ssrn.com/abstract=912795

Contact Information

Michael G. Hertzel
Arizona State University (ASU) - Finance Department ( email )
W. P. Carey School of Business
P.O. Box 873906
Tempe, AZ 85287-3906
United States
480-965-6869 (Phone)
602-965-8539 (Fax)
Micah S. Officer (Contact Author)
Loyola Marymount University - Department of Finance and Computer Information Systems ( email )
Los Angeles, CA 90045
United States
Zhi Li
Tulane University, A.B. Freeman School of Business ( email )
7 McAlister Drive
New Orleans, LA 70118
United States
504-314-2488 (Phone)
Kimberly Rodgers Cornaggia
American University - Kogod School of Business ( email )
4400 Massachusetts Avenue NW
Washington, DC 20816-8044
United States
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