Intra-Industry Spillover Effects: Evidence from Bankruptcy Filings

49 Pages Posted: 20 May 2016 Last revised: 24 Mar 2018

See all articles by Nhan Le

Nhan Le

Australian National University

Phong T. H. Ngo

Australian National University (ANU)

Date Written: March 21, 2018


Firms contract capital expenditure and reduce new debt issuances following the bankruptcy of an industry-peer. The effect is strongest for financially constrained firms or firms operating in industries that are nascent, dependent on external finance, or geographically concentrated. The effect weakens in diversified firms and in concentrated industries. Taken together, these findings suggest that financing constraints, firm opacity and industry competition are important amplification factors of the industry spillover effects. We establish causality by identifying idiosyncratic bankruptcies and implementing an instrumental-variables estimation to mitigate the confounding effect of general industry conditions.

Keywords: Bankruptcy, Contagion, Spillovers, Investment

JEL Classification: G31, G32, G33

Suggested Citation

Le, Nhan and Ngo, Phong T. H., Intra-Industry Spillover Effects: Evidence from Bankruptcy Filings (March 21, 2018). Available at SSRN: or

Nhan Le

Australian National University ( email )

26C Kingsley Street
Acton, Australian Capital Territory 2601

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Phong T. H. Ngo (Contact Author)

Australian National University (ANU) ( email )

RSFAS, College of Business and Economics
Australian National University
Canberra, Australian Capital Territory 0200
+61 2 6125 1079 (Phone)


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